Working for stock holders is getting tiresome and I'll never get as much as I put into it.

A business opportunity has come up.

What should I ask?

Any advice would help.

1) Stay away from a retail business.
2) Only consider a business in a field that you are very familiar with.
3) Hire a really good small business accountant to review. This will cost some money. He/she will be able to find the truth about the business that you cannot find out by asking questions of the current owners.
4) Resist efforts for a quick closing.
5) Consider an asset sale. The accountant can advise here.

For me, if I was inclined and wanted to spend the dough, my business would be rental properties. Preferably around college campuses.

Good luck with whatever you decide.

+1 on have an attorney wise in financial dealings. Mine saved my ass on a business that the sole owner was cooking the books.

quote:

Originally posted by Edmond:
A business opportunity has come up.

Good Luck.

An opportunity for someone.
Books
Liability
Past performance
Future forecasts
Why
Assets
Location
City planning if at a location
Why leaving
Trends
Market
Taxes
ROI

Your own business really means you work more for less.

Don't trust numbers, lots of folks lie.

Look at sales tax returns, and how many consumables were used/how much money was made per consumable.

Already some good advice but I would like more details.


You need the right attitude to own/run your own business but I wouldn't have done anything else.


Jim

typically an owner will not over report income UNLESS they are planning on selling. Look for expenses in previous years that would have related to income generated in future years. It will look funny because net income will be low for a year and then all of a sudden rise because the expenses were taken the earlier year.

Just off the top...

Prior 5 years income tax returns
Sales tax returns if applicable
Insurance coverage
Claims and lawsuits past and present
Certificates of good standing for all jurisdictions where applicable
Copy of current lease
List of key employees and past 5 years total compensation
Income statement
Balance sheet
Employment agreements if any
Complete and current inventory if applicable

Then do a SWOT analysis for both the specific business in question and specific industry - Strengths, Weaknesses, Opportunities and Threats.

Hire an experienced accountant and experienced business attorney - should be very high priority.

That should get you started.

WHY WHY WHY is this for sale?????

WHY do you want to buy a business should be the first question. Self employment is not for everyone.
I am self employed and started my own business. It is not easy, but I would not work for anyone.

braillediver and FLhiker questions will not only prvide insight you need, but may well help you see where you are "really" at in your own head.

The steps and time getting to know the details of the past five years as well as the other questions and points, will "walk you through" in a way you have yet to realize in how you think, what you are strong in and what you are weak in, both in this specific business and as it pertains to you "wearing it like a second skin".

A business is an unforgiving and harsh mistress.

And if you have a spouse, she needs to be 100% with your making the decision, and like marriage, all that "for richer for poorer, sickness and in health, weather you like it or not..." apply. Double.

You need to see 3 years of independently audited financials.

At a minimum of 3 years of the statement of cash flows.

You need to identify what the total market size for this business.

How much market share do they currently have?

Who are their main competitors?

What makes this business different from the competition?

What are the barriers of others entering this market?

Investigate for any liens or judgements against the owner/business.

It takes 3 people to run a successful business:
A dreamer
A businessman
A sonofabitch

Assets. Does this involve real property?

If so, are there any environmental concerns now located or to be discovered? For example I have a friend that has a small business in a rented location. Under that property there is a plume of dry cleaning solvents from the business that is two doors down from him. The plume is now being mapped, it is migrating under nearby residential properties, some dating from the 1870's and none that would be considered physically distresses. The cleaners is still in operation, same ownership since the early 1900's. I'm no attorney but somebody is going to have to pay at some point.

Obviously sale price of the building is determined beforehand but what if the building is rented or leased? Does the present owner have a "sweetheart deal" or is it at normal market value? Reason I ask this, in the early 80's while living out west a friend and I had an opportunity to purchase a franchised auto parts store. It was in our opinion an underperforming business, elderly couple owned it and employed their "challenged" daughter in it's operation.

While they had a good quality product line it was not as well known as their largest challenger, a NAPA franchise. My friend and I felt we could "pull it off" due to our experience in the business. The other issues were challenging.

First and foremost, the owners were amicable to selling the business to us. But the first thing that they stated was that they wanted to be assured that their daughter would have a job. That was roadblock number one. While she was what I think autistic and functioned pretty well, both of us had wives that worked part time. It made no sense to both of us that we had to keep their daughter on while we would have had some potential lean times and may not ourselves being able to pay our wives or maybe ourselves while getting off the ground. And if we had "agreed" to that clause and terminated her for any reason whether or not justified we would have been labeled as the bad guys. Or worse in our minds being deceitful, agreed to keep her on then knowingly went into the purchase knowingly intent on terminating her employment, while something could have been made up, bad karma not to mention how fast this would get around town. And while the owners were not aligned with the local auto shops, that fell to the NAPA store this family were long time ranchers so their loyalties fell to the ranching community in the area. Didn't want to piss off the clientele either and be left with the walk in trade only, the do it yourselfers could not sustain that business not to mention the associated grief with catering to that crowd.

Second and important also was the ownership of the building. The couple did not own the building, they were on a verbal rent/lease agreement with the owner of a local bank. Both parties were long time residents with roots going back many generations in the state. As my friend and I were both "outsiders" and had worked for other persons that were also said outsiders there were some loyalties there that we felt would be liabilities to us. While the owners were open to us buying in as we were both pretty asset poor the whole thing could have come crashing down if and when the property owner decided that we were not worthy of a favorable real estate deal either a purchase or lease. Basically, a store with no place to run it from. Sure there were other properties available for sale or rent in town but when you are a distressed business and need a place fast there are suddenly a lot of sharks in the pond , take advantage of the situation for their own benefit.

There’s some good advice coming.

Anymore thoughts from other members?

Go into it with your eyes wide open, get all the information you need (with professional help to ask the ones you don't know to ask), and be prepared to walk away. And if it's deemed worth the risk, negotiate everything.

What type of business are you buying? That would help with which kind of questions you need to ask.

Have you searched them out on Google? You might be surprised like potential competitors moving into that territory, bad publicity to overcome, etc.

Have you ever owned your own business and do you have the experience of running a similar business?
Those answers would be helpful to determine what you need to know so we don't recommend a lot of things yo already know (or don't).