- Develop your plan for this new business. Does this business match your personal and financial objectives? What do you expect from this business? What are you willing to risk and how much time can you devote to learning and running the business?
- If using the business to expand your customer base or production what will be the impact of adding the business. Will you be able manage the additional employees, production facilites, customer base, or employees? Will the addition of the business add to your bottom line? Do a complete cash flow projection and financial analysis before moving forward with the purchase.
- Go visit the business seller. Ask to see the financial statements, a list of customers, prices, ask the reason for selling, and check the existing inventory.
- Review facilities and equipment closely. Is the equipment in good shape or will considerable capital investment be needed to keep the business running?
- Are there any legal actions pending against the present operation and are there any
business leases or mortgages on any properties involved? - If an agreement is reached, have an attorney draw up the sales agreement and
research state records for any liens on the property for failure to pay debts. - Before signing a sales contract, the seller should present a final count of assets,
including inventory.
Purchasing a business is an exciting and challenging undertaking. But, carefully analyze exactly what it is you’re buying. No one wants to buy someone else’s business problems.
Adapted in part from "Buying an Existing Business – Look Before You Leap" in the Fall, 2008 Edition of the Mastering Marketing newsletter from the University of Maryland Cooperative Extension.
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