If you find a business that you would like to buy, you will need to consider a number of points before you decide whether to purchase it. Take a good, close look at the business and answer the following questions. They will help you determine whether the business is a sound investment. In most cases, buying an existing business is less risky than starting from scratch.
- Why does the current owner want to sell the business?
- Does the business have potential for future growth, or will it’s sales decline?
- If the business is in decline, can you save it and make it successful? Is the business in sound financial condition?
- Have you seen audited year-end financial statements for the business?
- Have you reviewed the most recent statements? Have you reviewed the tax returns for the past five years?
- Have you seen copies of all the business current contracts?
- Is the business now, or has it ever been, under investigation by any governmental agency? If so, what is the status of any current investigation?
- What were the results of any past investigation? Is the business currently involved in a lawsuit, or has it ever been involved in one? If so, what is the status or result?
- Does the existing business have any debts or liens against it? If so, what are they for and in what amounts?
- Does any single customer account for a large portion of the sales volume? If so, would the business be able to survive without this customer?
- Does the business experience high employee turnover? If so, why?
- What benefits does the present business offer its employees?
- Will the change of ownership cause any changes in personnel?
- How many customers does the existing business serve on a regular basis?
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