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  • Writer's picturePace Accounting

Investigate Before Buying a Business

If you are considering buying an existing business, take time to investigate the business thoroughly.

Don't be too eager. Many people feel they should get into the business and then worry about the problems as they develop. An investigation of all the problem areas may indicate that you shouldn't buy that particular business in the first place.

Make sure that the price is not too high. Many small businesses are not profitable enough to give an acceptable return on both the buyer's time and money. If the buyer wants $90,000 per year for working 60 to 70 hours per week and wants a 12 percent return on his $100,000 investment, the business must net $102,000. Analyze the past performance of the business you're thinking of buying to be sure it can satisfy your requirements.

If you are willing to take a reduced return on your time and money for the sake of self-employment, do so with your eyes open - know the facts.

Ask questions. Most buyers don't ask enough questions or require enough financial history to make an informed decision. Any business worth buying should have kept adequate records. The inability or the unwillingness to provide the proper financial information is an indication that the business may be overpriced.

The need for professional assistance when buying a business cannot be overemphasized.

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