Buying An Existing Business Part 1 When you're thinking about going into business for yourself, it's a smart idea to buy an existing business. But before you sign on the dotted line, make sure the company is all it's cracked up to be.
You've found a business that's right for you, put avalue on it and decided on a purchase price. Now, make sureeverything else checks out. Here are the first five things toconsider before the deal goes through:
1. Is the location leased? If there are less than threeyears left on the lease, look into getting a new term or aguaranteed extension from the landlord. A good location meansnothing if you have to move out in a year when the leaseexpires.
2. Will the employees stay? A key employee'sdeparture could profoundly affect the business's futureoperations and earnings. Also, is there an employee who can run thecompany in your absence?
3. Who are the customers? Do any of the clients accountfor more than 10 percent of the business's gross sales? Doesthe company have a binding contract with these customers?
4. What about training? Is the owner willing to stay fora specified period of time to train you or at least be availablefor phone consultations? If not, is there a key employee who cantrain you?
5. Who's your competition? Check the surrounding areaand industry records. If you're planning to buy a doughnut shopand another one is due to open down the street, the company may notbe such a good investment.
Check out tomorrow's tip of the day for six more questionsto answer before buying an existing business.