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MP-01 Buying a Business                 SCORE Chapter 570

Buying a Business

 

1. What are you buying?  The Corporation or the assets of  the Corporation? • Real Estate   • Fixtures   • Equipment   • Inventory   • Accounts receivable   • Pre-paid services   • Good will   • Customer list   •   Name (if registered)  • Liabilities  • Phone numbers

 

 2. Are there balances due?

• Unpaid bills   • Back taxes   • Liens   • Gift certificates   • Customer
deposits • Merchandise in transit   • Items under construction

 

3.  Will you get landlord wavers where needed?
• Installed equipment/Fixtures   • Air conditioners   • Refrigeration   • Soda & other coin operated machines • Others

 

 4. Are all leases transferable?

• How long is the lease   • Does it have an escalation clause or a balloon

 

5.  How about CAM charges... (Common area maintenance)

 

6.  What is their credit rating?

• Will prior bad ratings effect your business   • Have you checked major suppliers and D&B

 

 7.  Are there employees? • Are their benefits and withholding up to date   • Can you easily dismiss them   •  If they are essential,   will they stay   •  Do they have special employment contracts

 

  8.  Are there licenses required?

• If so are they transferable   • Can you qualify   • Are there any waiting periods  

 

  9. Will you get a Non-Compete clause with the sale?  For how long?

 

  10.  Will you keep the phone number?• How long is the directory commitment, can you afford it   • How much business does the phone bring

 

  11. Are there any pending law suits of judgments?

 

  12. Have you seen 3yrs. (Schedule C) of their Income Tax return?

 

  13. Are there recent register tapes?  Bank deposit slips?

 

  14. Have you talked to Sales Reps, Supply Houses and Competitors?

 

  15. Have you checked the customer count?

     • On different days   • At different times

 

  16. What changes have occurred in the neighborhood?

• New business openings   • Redirection of traffic   • Additional traffic or new traffic signals  
• New traffic islands   • Deterioration of housing

 

  17. Was a large percentage of the business done "out of house"? ....Will you keep it?

     • Outside sales people   • Personal contact   • Friendly bids

 

 18. Are there large buyers or clients involved?

• If they don't renew, how will it affect the business   • Are School bids or Government bids a big segment of the business, How safe are they

 

 19. Why does the seller want to sell?

     • Is it valid, have you checked

 

 20. Will the seller help with financing?   If not - why not?

 

 21. How do your needs/expectations differ from the sellers?

 

 22. Is their history compatible with your future?

• What was their life-style   • Will it satisfy you   • Do you have any special needs financially or physically • Are you and your family willing and able to devote the time

 

 23. How can I determine the real value?

• Did you get ALL the figures   • Have you consulted a CPA   • Have you considered the cost of money? For example borrowing it if you need to or loss of interest if the money is now invested?
• What will the return be after your salary?