Ten steps to buying a business from James Halloran
Tuesday, May 6th, 2008In this two-part blog, the first part to be posted today and the next the following week, are ten steps to assist you when buying a business, based in part from James Halloran’s book “The McGraw-Hill 36-Hour Course on Entrepreneurship”. Here are the first five tips:
1. The business that you are interested in buying must align with your personal and financial objectives. Before looking for a business to buy, create a “target business profile”, have specific criteria for what you want in a business to buy. For example, how much are you prepared to invest, what level of risk are you willing to take on, what is your minimum expected return, and how much time can you dedicate to learning and managing the business.
2. Aim to identify business opportunities with the potential to grow and which offer an attractive return on investment. It may be tempting to buy the first business that fits your needs, however it is important to always consider an attractive business objectively.
3. In an initial meeting with the business vendors or brokers they should be able to provide you with brief financial reports, history, price, and reason for sale. This will give you a good overview of the business, and give you an indication of any financial adjustments that needs to be made if you go ahead with the sale process.
4. If you are happy with your initial judgement of the business and believe it to be sound, request additional appointments in order to gain more information which will allow you to consider the business from other angles
5. Visit the property from which the business is currently run, this will give you the crucial opportunity to judge how well it has been managed and maintained. If it is a service business you are looking to purchase for example, it would be beneficial to talk with the employees and perhaps customers if the opportunity arises. A prepared checklist of information needed could include:
• The complete financial accounts of the business’s operations, to include all income tax returns and state sales tax forms for the past three years and a list of all assets to be transferred to the new owner.
• Records of any legal action past or pending against the business.
• A copy of the business lease or mortgage.
• A contact list of all major suppliers to the business with the name of person/s who have been dealing with the company.
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