Top - Business Opportunities - Questions To Ask Before Buying A Business

CENTURY 21 Select Real Estate, Inc. Commercial Division has matched hundreds of businesses for buyers.  To be sure you meet your match, ask yourself these questions before you buy any business. 

-  Your first question about any business acquisition should be, "Why is this business for   sale?" 

-  Why do you want to acquire the business?  Is your motivation expansion, absentee investment, or creating a job?  The true  reason for purchasing a business will determine the type, size and location. 

-  Are you aware of the different types of businesses available in your market place?  By reviewing your objectives, interests,goals and requirements with a qualified associate, you can best target the business to purchase. 

-  Does the business require technical knowledge?  If you are considering a mid to high tech   business, do you posses the knowledge to manage the business.

-  How much time will it take you to become familiar with the business operation?  Is the seller willing to dedicate that amount of time to train you?  The transition can range from two weeks to six months, depending upon the technicalities involved. 

-  Can all financial information be verified?  Be wary of any information that cannot be verified by an examination of the financial books and records or by personal observation (e.g. inventory, leases, customer lists, etc.) 

-  Will the cash flow of the business be sufficient to service new debt?  Will it also provide a living for you or a reasonable return on your investment?

-  How much operating capital do you need after the purchase?  For example, you should be aware of how long it takes to collect accounts receivable.  Businesses that have daily cash receipts   require less operating capital than those which carry customer accounts. 

-  Is the time remaining on the lease (including option periods) at least equal to the term necessary to pay off the balance of the purchase price?  Most businesses are sold with a down payment and the balance of the purchase price payable over a number of years.  You should determine whether the time remaining on the lease is not less than the term of the business debt.

- Is it likely that you will continue to work with the existing customers and suppliers?  To receive the same considerations that the seller is accustomed to, will you have to meet any special requirements? 

-  Are there "key" employees connected with the business?  If so, you need to establish the basis of a continuing relationship. 

-  Will the seller agree not to compete within the area which is currently being served by the business?  Typically the length of a non-compete covenant is five years or less.

- Is there litigation pending against the business?  The question you must answer is whether the litigation is inconsequential or has the potential of causing substantial harm.  There are many ways to purchase a business even with pending litigation.

Our Associates would be happy to help you answer these and many other questions which occur in the process of buying a business.