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?