Businesses For Sale Advice: Small Business Opportunities

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Streetwise Tips on Businesses For Sale

* Inspect all recent tax returns
Insist upon seeing tax returns from recent years. All too often, you will be told “well, of course we underreported our sales . . . doesn’t everybody?” No, not everyone under-reports their income. Suspect any seller who gives you this line. Not only does he or she lie on the tax returns, despite the risk of severe penalties, but probably is less than truthful in other respects as well. Assume everything this person tells you, verbally or in writing, is a lie. Get independent verification. And, of course, this includes verifying that the sales were actually underreported!

* Hold on to key people
Unless you completely understand a business “cold,” work strong financial incentives into your buy/sell agreement to keep key people in place during a significant transition period. This is particularly important for businesses for whom contact with major customers, such as through salaried salespeople, is a major means of selling products or services.

* Ignore pressure to close a deal
Sellers and business brokers love to pressure potential buyers by mentioning that other people are seriously looking at the business. A number of these “potential buyers” are probably just window shoppers. When I sold a six-month-old map business, with total sales under $15,000, I had almost fifty inquiries but only one serious offer. Even the smallest of businesses often take many months to sell.

* Dig into nonquantitative factors
Profits are realized, in part, because some nonquantitative aspect of the business appeals to a broad customer base—the service, the product, or the sales team, to name a few. Make an effort to pinpoint both the positive and negative nonquantitative aspects of the business you are considering purchasing.

At some point in the negotiation process you should get permission from the buyers to talk with their key customers. These people often have interesting insights into the business. Compare “your” products or services with those of the competition. And be sure to look into the overall market projections for “your” product or service. Will there be a market for the product or service tomorrow, five years from now . . . always?

* Advantages to buying
Despite the many caveats to consider before buying a business, remember that buying an existing business is, generally, a much safer and faster route to profitability than starting from scratch.

* Get a non-compete agreement
Include a non-compete agreement as part of the buy/sell agreement to guarantee that you won’t soon be competing with the seller.

* Source Streetwise Small Business Start-Up

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