Great Points For Buying A Real World Business For Sale

Great Points For Buying A Real World Business For Sale

Posted on June 26th, 2010 by Marketer

Some enterprising individuals are put off by the thought of buying an existing business for sale, as they see it as a veritable leap into the dark. The entire concept can be very alien if you’ve never been involved in these types of transaction before. Most of us are used to engaging in transactions where we buy a tangible product like vehicles or houses and in these cases “what we see is what we get.” A business valuation can be composed of several intangibles as well as inspectable assets and in many cases goodwill factors into the equation. Goodwill certainly comes into the equation in a service related business, as does a good client list and as such your process of due diligence will require you to explore and reveal quite a lot as you inspect different documents accordingly.

Always remember that there are two different viewpoints here. The seller will be very clear about the business and how much it is worth to him or her. This may often be inflated by a natural enthusiasm and the sheer amount of hard work and dedication that may have been put into the business to this point. Never disrespect the sellers’ point of view of course, but look at the documentation and evidence that you will find in the cold light of day and remember that it is entirely up to you to determine if you’re going to get involved and buy business interests in this way, according to your value parameters.

When you decide that you want to move forward and investigate whether to buy a business of interest, understand that this may be a lengthy process. At this time, you had better have a good level of common sense and humor and be ready to communicate at length with the seller.

This is where expert advisers will come into their own and if you have no real experience with this kind of business, its related market or niche, utilize proven resources and get as much help as you can. Don’t think that you can just hand off all the documentation and essentially the decision-making to these people, however, as the decision must be made, in the end, by you! The financial documents and all of the paperwork must be reviewed by you first to be sure that you have a great feeling initially before you hand them over for further processing by your experts.

A red flag will be raised if some of the financial documents are incomplete, information is missing, or they are poorly balanced or even not reconciled. Accounting traditions and precedents must be maintained at all times. You may be asked to sign some non-disclosure or non-compete documents before these are made available, but the financials are the rock upon which everything else is built.

Each and every operation is different in its own right and no two businesses are the same. There are so many different events that can come to bear to create such a variety of external influences and situations at any time. You will undoubtedly uncover some surprises and come across unusual figures and facts, but remember that while industry benchmarks are definitely of interest, you are focused on real-world information here.

Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream to buy a business.