The size and scope of an existing business will be in direct proportion to the scope of your investigation, but every investigation should be thorough. While thoroughness pays off, you will frequently feel pressured for a variety of reasons, such as the following:
*Another buyer in the wings (real or otherwise).
*Rising interest rates.
*A lack of time.
*Anxiousness to get started.
*"It just looks so good."
While many people do not take adequate time to investigate, there are others who never get started because they never finish investigating. You are the only person who can decide whether or not you've investigated the business thoroughly enough. Just remember, this is a decision you may be living with for many years to come.
Buying a business, like purchasing a home, is a highly emotional transaction. In order for you to make the best decision and achieve the most favorable terms, you must be aware of your emotional state at all times. Always ask yourself "Am I making this decision based on emotion, data or a combination of both?"
Before making a major investigation, do some preliminary work to evaluate the business. This will help you decide if you want to pursue this business further. Download the sample evaluation checklist to perform your own evaluations of prospective businesses. Make a separate copy of the form for each business you evaluate.
To conduct your preliminary investigation, make an outline of items to research that will be readily apparent without having to involve the seller. These items include:
*Location --How important is location to this particular business? Is the location ideal? Is the area undergoing any major changes such as the construction of high-rise office buildings, shopping centers, apartment complexes etc.? Are there any other changes in the neighborhood that could eventually affect the location's present desirability? How dependent is the company on walk-in business?
*Management --Does the owner have good relationships with his or her customers and employees? How will a change in ownership affect the clientele and employees?
*Goodwill --Has the management supported local or industry events either through membership or participation? If so, to what extent? How do they handle customer complaints? Check their written and stated policies. How long has the business been in that location?
*Environment --How well is the physical location maintained? Is it clean and well organized?
*First impressions --What is your first reaction to the business, including the above points? Compare your feelings about the business now and later after completing the other checklists.