Buying Tutorial

Do you dream of owning your own business?
Buying a business can be a complex process, from finding the right one to working out all the details required for a smooth transfer of ownership.
Going into business for yourself is a big step, one that can be full of apprehension and even fear
For Business Buyers
- Pride in the service or the product
- Flexibility
- Income
- Control of own destiny
- Recognition
- Security
- Privacy
- Status
- Customer and employee contact
What To Look For
How Long Has the Business has Been in Business?
How Long Has the Present Owner Owned the Business?
Why the present owner is selling?
Why Books and Records are Important?
Keep in mind that financial records are only the history of the business. There are no guarantees that they will or can be duplicated or repeated. All of your profits are future. In the final analysis, the financial records of the business are an indicator of what the business has done; what you do with its future is up to you.
How to Determine if the Owner Has Reported all Income?

The bottom line
Being in business for yourself can be a daunting prospect
Unfortunately, too many prospective buyers want to know the asking price first and then ask how much money they can make
What should you look for when considering a business to purchase?

Here are the steps to buying a business that over the years have become the most efficient and practical:
Get the Basic Facts
Also, the business has to be able to meet your basic financial needs. You can expect a business to improve under your ownership, but you also have to be able to meet your living expenses as well as meet the debt service of the business. It is also important to remember that almost all purchase prices and down payments are negotiable. In fact, businesses generally sell for about 15 percent to 25 percent less than the original asking price. There is an old adage that says, “the more cash you are willing to invest in a business purchase, the lower the full price; the less cash you are able to invest, the higher the full price.”
How long the present owner has owned the business
Why the present owner is selling
Why books and records are important
The financial records are a good indication of how well the business has been doing over the years. Keep in mind that tax records are not designed to show the business in the best light; no one likes to pay more taxes than they have to, and business owners are no different. Generally, tax returns are a worst case scenario. You need to be able to look at the expenses and discover which ones are non-cash items, such as depreciation and business use of home and vehicles. How important was that business trip to Las Vegas? A professional business broker can point these items out to you.
Keep in mind that financial records are only history. There are no guarantees that they will or can be duplicated or repeated. All of your profits are future. In the final analysis, the financial records of the business are an indicator of what the business has done; what you do with its future is up to you.
How to determine if the seller is reporting all income
The simple answer is – you can’t! Not reporting income is against the law.
You should consider only the income that the seller can show you. We all know, of course, especially in cash type businesses, that there is the possibility that the seller is not reporting all of his or her income for tax purposes. This “underground economy” has been well-documented and is in the billions of dollars. Many sellers will tell you about how much they are “skimming,” but you should ignore their statements, since they have no way of proving these amounts.
In determining whether a business is the right one for you, you should base the decision on the figures actually supplied to you by the seller.
Insider Tip
Here are some questions that you should ask yourself before taking the next step
For Business Buyers
How long have you been thinking about buying a business?
What is your time frame to find a business?
What is your primary reason for buying a business?
Are you willing to invest a majority of your liquid assets in a business?
Are you independent enough to make your own decisions and be in control?
Is your family supportive of your owning a business?
Are you open-minded about different opportunities, or are you looking for a specific type or business?
Do you have reasonable expectations?
Can you make the “leap of faith” necessary to buy a business?
Do you need a guarantee?
Do you have other questions?
Be sure to visit Buyer FAQ for answers to the following questions
- Why should I buy a business rather than start one?
- What is the real reason people go into business for themselves?
- How are businesses priced?
- What should I Look for?
- What does it take to be successful?
- What happens when I find a business I want to buy?
- Why should I go to a business broker?
- Do I need an attorney?
