Buying an Existing Business as an Entrepreneur.

Buying a preexisted business can decrease lag time without a salary, lighten the burden of start-up costs, establishing markets, and other costs associated with a new business. Established businesses may have existing good will – intangible assets such as historical value or reputation.

The decision to buy a pre-owned business requires careful evaluation of various factors, including financing your purchase and pricing. You must understand the criteria for selecting a business.

Consideration should be given to the following questions:

? Is it in a desired location?

? Can you get the required financing?

? Does the business matches your strengths?

? What is your experience with the industry?

? How much are you willing to invest?

? Is the business profitable?

? Does the business strike you as the one you enjoy doing?

? Is the business fairly priced?

? What size business do you desire in terms of employees sales, and profit?

If under consideration the business has a product or service outside your area of expertise, it is important to make sure that if the key employees will stay after the sale or that you will hire someone with similar experience.

Here are some sources to consider:

? Friends and acquaintances

? Printed advertisements

? Trade sources and suppliers in the industry

Evaluating the business

As a buyer, you must evaluate a business by reviewing its customer history and the ways it operates. You must need to develop an understanding of the business that you are willing to buy. Method of acquiring and serving its current customers, figuring out how this business generates its sales, learn its marketing strategy, and develop an understanding of this business’s operational functions and finances.

Checklist of material for the evaluation process

Important questions

Ask and get answers to questions regarding all aspects of an existing business before proceeding to any purchase agreements. Start with general questions, like the ones listed below. Other questions may be required depending on the specific business:

Why is the business for sale? Has it been making a profit? If not, do you have a plan to make the business profitable?

? Will the sale include equipment, property, inventory, debts, employee contracts, name, logo, slogans, signage, customer files, etc.?

? What kind of reputation does the establishment have currently? How would you change that reputation? What is the price of good will? What is the consistency of the client base – a few large clients or many smaller customers?

? Are there any liens against the property for sale? Are there any claims on inventory or equipment? Have the taxes been paid to date?

? Have you reviewed the past and current financial statements with the counsel of an accountant?

? Are all of the books in order and well maintained?

? If using a broker, do you realize they are representing the interest of the seller?

? Are there any environmental issues with respect to your chosen business?

? Consider whether owner is willing to finance all or some of the purchase price

? Will the lease be transferred into your name or will the owner require a new lease? Is the location suitable for your plans? Are there any environmental concerns with this location? Are there licensing concerns?

? Will the owner be cooperative with the transition of ownership with regard to tax issues, utility transfers, government requirements, employees, and other procedures?

? What liabilities exist?

? Have you reviewed existing business contracts and the effect of the transaction on those contracts?

? Are customers loyal because of a personal relationship or because of the level of quality service?

? What policies have been established with the employees regarding work environment, salary/ commissions, benefits, vacation pay, and fringe benefits?

? If using a broker, do you realize they are representing the interest of the seller?

? Is the seller willing to sign a non-compete agreement?

? Will the seller agree to a contractual arrangement for a period of consultation?

The services of an attorney, an accountant, and a banker are highly recommended when buying a pre-owned business. Investigation and research will be the most important part to uncovering as much information as possible about the business you are about to purchase.

Buying a franchise

Franchising has emerged as a popular way for potential business owners to start a new business. A franchise offers advantages in name and product recognition, proven operation procedures as well as volume purchasing power. In this arrangement, the provider, or franchisor, contracts with you, the franchisee, to give you the right to sell or distribute a service or product under the franchisor’s system in a particular area. As with any opportunity, both advantages and disadvantages must be examined before a decision to invest is made.

Negotiations

Locate a list of lawyers specializing in franchise negotiations while in the research stage. Once a franchise opportunity has been selected, retain a lawyer for every step of the negotiations. The negotiations serve as the foundation of the franchise. Working with the lawyer, set policies and agreements that will enable the franchise to thrive now and in the future. All obligations, rights, privileges, risks, opportunities, assets, and liabilities must be detailed and agreed upon by all parties before the contract is signed.

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