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Buyer Beware

Purchasing a company? Avoid the mistakes that could ruin your business.

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This story appears in the March 2000 issue of Entrepreneur. Subscribe »

When Cindy Parks, 38, of Irvine, California, decided to go into business for herself, she thought the most expeditious way to do it was to buy an existing company. In the process, she received a valuable education in how not to buy a business. "I did everything wrong from beginning to end," she admits.

Her company is thriving now, but it wasn't when she took it over in 1995. The previous owner misrepresented the firm's financial status, assets and client base. Naively, Parks believed the information and handled the negotiations herself. Within days of closing the deal, she realized the company's actual revenue was a mere fraction of what had been quoted and half the clients the seller claimed to have didn't exist. She'd been deceived about other issues, too.

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