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Tips for “How to Buy a Business”
First make sure your business opportunity of choice complies with all business with all the Federal, State and Local governmental regulations and that it is properly registered and is in good standing. Next, find out if the business opportunity you're interested in provides an offering prospectus to buyers. If it's a business opportunity that falls under the FTC rule, then it's required to disclose specific information to you.
When choosing a business to buy, keep in mind that if you buy a successful business with a several locations and it’s been in business for over 10 years, you'll pay more for this established business that you would for a newer one. If you're considering a more recently established business acquisition, you should check out its history very carefully to make sure the sellers are not just dumping a bad business “painted for the market”.
If you were to ask a Merger & Acquisition Advisor or Investment Banker how to evaluate the "right" business opportunity for you, you would probably receive these guidelines:
1. Make an honest evaluation of yourself and your abilities. If you've been behind a desk for many years, will you be happy calling on business people and selling them a products or intangible service? Do you posses marketing and sales experience.
2. You must run your business enthusiastically. Will you be happy introducing a new product or an unusual service that the public knows nothing about? Can you generate honest excitement for a product or service?
3. You must have complete knowledge of the product or service with which you are involved. If the seller of the business gives you little or no training in technical or management know-how, be wary of the business opportunity. If the seller has organized all the operating knowledge into a standard operating manual, look with favor upon this business opportunity.
4. Make a market evaluation of the product or service to be offered. Is the market likely to remain strong for the product or services for many years to come? Have competitors entered the market and will become a threat to your business?
5. Find out how many other companies have been in this industry successfully for a respectable period of time. A legitimate seller will provide you with infmation to make you confident that you are making the right decision.
6. Check the training and experience required to run the business properly. Is there a suitable curriculum of training? What is the scope of training and third party support? Does your background fit the requirements of operating this business successfully?
7. What is the company's profit ratio to sales; to time and service requirements; and to the financial leverage requirements? Can you make more in another type of business?
8. Do you have to work more hours to make the same amount you do now? Can you invest the same amount in the business opportunity yet operate a larger operation and get a better return on investment?
9. Research company's history. Is it a newer company with a limited track record? Is it an older firm whose regular products have satisfied customers for years? Is in an older company whose products or services that have outlived their usefulness?
10. Evaluate the company with the associations and business groups in which the company or seller is involved. Business owners in specific industries flock together via seminars and conferences and therefore get to know each other. Tapping into the grapevine within the industry can be very helpful in learning some inside information.
11. The Better Business Bureau and similar groups collect complains about a business. These groups will give you a report if others have lodged previous complaints against the company.
12. Having an merger and acquisition advisor with some assistance form an attorney, accountant or business consultant is of the outmost importance. A merger and acquisition advisor is very versed and experienced in all of the issues relating to the sale or acquisition of a business. They can conduct an in-depth study and guide and protect through process of buying a business.
Because business sales, mergers and acquisitions is our business, we have a practical understanding of what it takes to win an excellent deal for our client. Since accountants and attorneys focus on numbers and contracts, their capabilities in providing full and complete acquisition services are limited. Our broad expertise allows us to go beyond numbers and contracts; we look into the intricacies of a business to help assure that the acquisition is a good deal for our client. We hold ourselves accountable for helping our clients achieve positive and lasting results. You will be very pleased with our great results and astonished with our low fees!
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