10 questions to ask in buying a business

Tips For Small Business

January 13, 2008|By STEPHEN L. ROSENSTEIN

Not every would-be entrepreneur wants to start a small business from scratch. There is an attraction to going into a business that already has a location, name, permits, customers and cash flow. But there are risks.

Here are 10 questions to consider regarding the purchase of business:

Have you assembled an acquisition team consisting of a banker, accountant and attorney?

Why does the owner really want to sell the business?

What assets convey with the business? Do there seem to be more fixed assets than it warrants?

How much inventory is there? Excessive inventory could be a red flag.

Will the owner help you learn the business and provide operating help for a while?

What aspects of the business are most critical for its survival?

How much cash does the owner need up front?

What is the best way of financing this purchase?

Is the owner willing to show projected financial statements, the balance sheets for the past three years, income statements and tax returns?

Have the company or its principals been involved in bankruptcies or lawsuits?

Assistance is available at www.onlinebusadv.com and www.businessbookpress.com.

Stephen L. Rosenstein is co-chairman of Greater Baltimore, SCORE Chapter No. 3. Call 410-962-2233 to speak to a SCORE counselor or visit www.scorebaltimore.org To send a question to SCORE representatives, e-mail smallbiz@baltsun.com

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