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RESOURCES FOR ENTERING
CLIENTS +
Following are some of the most common
questions asked by potential clients. The
responses are based on both experience and
knowledge. If you have any questions that we
have not covered please don't hesitate to
contact us.
What Should I Look For When Entering a
Business?
Here are some items you should check
when considering the purchase of a
business:
How long has the business been in
business?
A business with a long track record
means there are good reasons for that
business to be operating. It will be well
known in the area, and people will be used to
patronizing the business or using its
services. The longer it has been in
operation, generally, the better the
business.
How long has the present owner owned the
business?
The longer the present owner has
been in business, the more likely he or she
has been successful. People don't stay in
business if they are not making money.
Why is the present owner exiting?
If the owner of a business has been
in business for six months, is 37 years old
and wants to retire, you should be
suspicious. The more valid the reason for
exiting the business, the more realistic the
person will be in considering your offer.
However, keep in mind that after five or six
years or more, people do get restless or
"bum-out" sets in, or people look for new
challenges. Why the exiting person is exiting
is an important question—get the
answer.
Why are Books and Records important?
The financial records of the
business are a good indication of how well
the business has been doing over the years.
Keep in mind that tax records are not
designed to show the business in the best
light: no one likes to pay more taxes than
they have to, and owners of businesses are no
different. Generally, tax returns are a worst
case scenario. You need to be able to look at
the expenses and discover which ones are
non-cash items, such as depreciation, and
business use of home and vehicles. How
important was the business trip to Las Vegas?
A professional business broker can point
these items out to you. When in doubt,
however, seek outside assistance.
Keep in mind that financial records are only
history. There are no guarantees that they
will or can be duplicated or repeated. All of
your profits are future. In the final
analysis, the financial records of the
business are an indicator of what the
business has done; what you do with its
future is up to you.
How do I determine whether the seller is
reporting all income?
The simple answer is that you can't!
You should consider only the income that the
seller can show you. We all know, of course,
especially in cash type businesses, there is
the possibility that the seller is not
reporting all of his or her income for tax
purposes. This "underground economy" has been
well-documented and is in the billions of
dollars. Many sellers will tell you about how
much they are "skimming," but you should
ignore their statements, since they have no
way of proving these amounts. In determining
whether a business is the right one for you,
you should base the decision on the figures
actually supplied to you by the seller.
Being in business for yourself can be a
daunting prospect. There are no guarantees.
At some point, after all of your
investigation is completed, you will still
have to make that "leap of faith" that is
necessary to proceed with the purchase of the
business. You will have to work hard, perhaps
even "tighten your belt" a little and perform
many different jobs to be successful in your
own business. But, if running your own show,
making your own decisions, not having to
worry about job security (remember, no one
can fire you from your own business), and
just being on your own are
important—then owning a business is for
you. After taking this leap of faith, almost
all business owners will tell you that they
would never go back to being an employee.
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