6/28/2017

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Buying A Business

Like home ownership, owning a business has always been a part of the American dream.

Starting a business from scratch is how most entrepreneurs get started, but there are those who actively look for opportunities to purchase existing businesses.

Depending on the type of business, the purchase can be relatively simple or it may take a lot time to research and make determinations as to whether it is a good buy or not.

Large businesses are usually sold by law firms and other agencies that specialize in selling big ventures. They have the manpower and resources to research and connect sellers with buyers who have the money and resources to make large purchases.

Small businesses, on the other hand, are usually listed with local realtors or attorneys, or sold independently by the owner.

Small and midsize businesses may include barbershops, mini malls, restaurants, gas stations, mini marts, car dealerships, real estate offices, escrow offices, antique stores, and art stores.

Jewelry shops, toy stores, gift shops, religious stores, record stores, telephone services, cell phone stores, landscaping businesses, pest control businesses and printing shops are sold every day.

If you purchase an existing business, there are some things that you should do to make sure that the business does not have hidden liabilities.

Find out if there are tax payments due, if there are judgments against the business, and if there are loans and other bills that are due.

You should know what the assets are, what the gross and net incomes are, what the liabilities are, who your customers are going to be, and why the business is being sold.

You should request a cash flow analysis statement, going back at least a year or more. This statement will give you a view of how the business has performed in the past, whether there are certain months that the income drops substantially and shows the monthly overhead expenses.

You need to know how many employees you have, who the managers are and if they plan to stay with the company after it changes hands.

If the business has only a few employees, you may have to manage them yourself. Have you ever managed employees yourself and if so, how many?

Do you have experience with the day to day management operations of a business and if not, do you have someone who is going to take over that aspect of the business?

Are there trademarks, patents, or copyrights that are owned by the business and are they a part of the purchase price?

How is the economy right now, how has it been in the past few months, and what are future projections? The overall health of the economy is a critical component of any business.

If you are buying the business and you need a loan, have you looked into the types of loans that are available, such as short term loans, long term loans, lines of credit, construction loans, or real estate loans?

There are small business loans and grants offered by federal, state and local governments and banking institutions. Aside from small business loans, there are minority loan programs, disabled entrepreneur programs, and other loan options.

Before you buy your business, do the research. Once you get started, stay focused and have patience.

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