[?] Subscribe To This Site

XML RSS
Add to Google
Add to My Yahoo!
Add to My MSN
Subscribe with Bloglines


Home
Contact Me Directly
About the Author
Starting a business
Avoid Failure
Business startup guide
Choosing a business
Buying a business
Buying a franchise
Business Opportunity
Funding
Business Plans
Business Ethics
Management Skills
Business Structure
Marketing Plans
Business Startups
Customer Service
Business Computers
Selling Techniques
Recruitment
Business Security
Money Management
Inventory Management
 

BUYING A SMALL BUSINESS CHECKLIST

Run through this small business checklist, before making your decision to buy a business, to ensure that you have all the answers to the questions that you should have asked. First of all though ask yourself if you think that you will enjoy owning such a business and selling its products. If you will then get the answers to these questions:-

  • Why is the business being sold? Does the reason given sound truthful and reasonable?

  • How long has the business been in operation? Is it young with potential or old and established?

  • Has the business still got potential for future growth?

  • How profitable is the business? Get your accountant to check the audited statements and tax returns.

  • What is the cash position of the business like? Is it having difficulty in collecting outstanding accounts?

  • Are sales increasing or declining? If declining can they be turned around?

  • Are there any pending lawsuits against the company? How are they likely to effect the business? Have there been any past suits and if so how have they turned out?

    • You might want to expand the questions you ask in this small business checklist here if there are complicated legal matters that need to be explored.

    Take a note of these in any sales agreement and clearly state who will be responsible for the costs.

  • Does the business have any contracts with either customers or suppliers and do you consider them good or bad?

  • Has the business or senior management ever been investigated by the police or government?

  • What does the business owe in the way of debt? Are these borrowings, shareholders debt, liens or supplier debts? Are the amounts owning reasonable?

  • Has the business got all the equipment needed to operate and produce the goods it sells? Is any machinery or equipment owned or hired? Is it due for replacement?

  • Are the raw materials or goods of the business readily available? If there are very few suppliers, what would happen if any of them went out of business?

    • Are the businesses suppliers sound?

    Again expand this small business checklist with questions that will be suited to the type of business you are investigating.

  • What does the inventory (stock) of the business amount to from the point of sales? Is it obsolete, unfashionable or of poor quality? Don’t buy inventory that you can’t sell.

  • Ask about the market share of the business. Don’t believe everything that you are told when thinking of buying a business.

  • How does the business sell its goods or services? Are they successful? Can you see possible improvements? Add these questions to this small business checklist and ask the owner about them.

  • What is competition like in the industry? Is the business meeting it or declining because of it? Is competition increasing or declining and why?

  • What is the customer base like? Who are its customers and are the numbers increasing, steady or declining?

    • Are sales reliant on one or two large customers or many smaller ones? How secure are the customers for the business? Will the business survive if any large customers stop buying? You need to be clear on these points when evaluating a business.

    The ideal is to have a base where no single customer accounts for more than 10% of total sales.

  • Is the business seasonal? If so check the low season sales.

  • What does the seller estimate the potential for growth in sales is? Do you agree?

  • What are the employees of the business like? If you have doubts about some, ask if the present owner would be prepared to pay them off?

  • Are the employees unionized? This need not be a problem but you should be aware of it if they are.

  • Is the management staff good, how long have they been employed and will any leave if you buy? If the business has many employees or very specialized employees you will want to add further questions to this small business checklist on such employees.

  • What has employee turnover been like? High turnover is not a good sign.

  • How do wages and benefits compare to industry averages? If way above average, why?

  • Will the owner agree not to go into competition with a similar business within an agreed time period, if applicable?

  • If the business is in rented premises, are the leases sound and of reasonable length?

  • Are the premises of the business safe and secure, both in summer and winter?

  • Is there anything unique about the business that you like? Has it some special potential that you see which will make it a good investment?

    • Check any patents, exclusive rights or markets that have special potential. Will they belong to you? Lawyer up here as they will have legal questions that need to be added to your small business checklist.

When thinking of buying a business, don’t be rushed into buying without a thorough business evaluation checklist covering all the basics of the business.

If the seller shows reluctance to answer questions or release documents, beware!

If you are being pressurized to make up your mind, before you are happy, because others are ready to buy, be wary!

Any genuine seller, wanting to sell, will provide answers to all your questions as per your small business checklist.

Return from Small Business Checklist to Buying a Small Business

or

Return from Small Business Checklist to Business Management Basics Home Page


footer for small business checklist page