Checklist For Buying A Business

Before You Leap

You invest a great deal of money when you purchase a business, it is important that you know what you are buying.

  • Is the location good? (i.e. access, parking, visibility)
  • What is the sales pattern year by year and month by month?
  • Is the pattern seasonal or related to some business cycle?
  • Do the records show that the rate of turnover is in line with what the current owner states?
  • Is the stock old or unsaleable?
  • Has the stock level been run down?
  • (A low level of stock will mean you need additional finance to build up to a reasonable trading level)
  • Will you be able to continue buying from existing suppliers?
  • Will you be able to increase sales with current resources?
  • Are new developments going to commence or open in a nearby location which could affect your trade?
  • (Visit your local council planning division – Remember that any new business is an extra competitor)
  • Is the business:
  • Expanding?
  • Decreasing?
  • Remaining static?
  • What are the unique competitive advantages of the business?
  • Do a small percentage of customers represent a large percentage of sales?
  • Will you have the same level of expense?
  • Is the business going to give you sufficient income?
  • Is the depreciation claimed for reasonable?
  • Do you understand the terms of the lease?
  • What would a shift in sales have on your costs?
  • Is the stock figure shown a true value?
  • How have they valued the stock?
  • Are the profits equal to the risk?

Milage May Vary

This is by no means the total list of questions you need to ask yourself however it is a starting point. You need to get professional assistance to ensure that you understand the ramifications of all actions taken.

Important questions to ask :

  • Why do I want to buy this business?
  • Will it do what I want?
  • What is the real price?
  • Am I prepared to pay this price?