Thinking about buying an existing business? Before you do, make sure you know the answers to these ten questions.
Questions to Ask When Buying a Business
Before buying a business, there's a lot of information that should be gathered. This information comes in the form of answers, with the key questions falling into three main categories: general business operations, the finances, and the previous owners. Read on to see why.
Four General Business Questions To Ask
The first, and most important question to ask about a business being sold is Why is the business being sold? The answer to this can be simple; retirement, death of an owner, financial mishap or family issues. Whatever the answer, it must sound realistic.
Other general business questions pertain to the history of the business such as:
What is the past history of the business?
How many owners has the business had? If there are many, why?
What was the initial response to the business when it first opened?
What is the outlook for the business?
Find out who the past owners were, why they sold or left the business, and if there is a pattern to it such as none of them could make it profitable or similar issues kept arising for each owner. if the business is new, find out how people reacted to the business when it opened. Talk to customers and suppliers (without divulging about the possible change in ownership). Look at future trends to see if the business can continue in its current form; and if so, look at the potential for growth.
The Four Business Finance Questions
This brings us to the next section, finances, which is also extremely important in the business buying decision. Four of the ten questions about the business deal with finances:
Is the business paying the bills and are they current?
Are there any loans? If so, what are the terms?
What is the condition of the business credit?
What is the cash-flow?
When buying an ongoing business, the new owner can be held liable for previous debts incurred by the former owners. Most business loans are in the name of the business and therefore subject to being passed along with the business. Because of this, prospective owners must know about good and bad debts as well as how long ago they occurred. There should be a continuous pattern of equal, or less, money going out than what comes in.
Two Important Questions About The Owner
While the life of the previous owner may not seem important in regards to the business buying decision, it is. Two key questions about the owner or former owner must be answered:
What impact has the owner or former owner had on the business?
What is the reputation of the owner or former owner in regards to the business?
Business can be greatly affected by the reputation and impact of an owners actions. Smaller family run businesses especially fall into this category. If a former owner isn't well liked or has built up a bad name with the community, this could hamper both resources and income for future owners.
Does It Look Realistic
This is a question which must be asked before handing any money or signing any paper. Look at all of the information provided by the current or previous owners. If any portion of the information appears out of place or sets off suspcions, dig deeper to find out the reasons. Once the sales contract is signed, it is very hard to go back and claim neglegance.
Read more: http://www.brighthub.com/office/entrepreneurs/articles/38889.aspx#ixzz0w6Ib64Cg
Monday, August 9, 2010
Friday, August 6, 2010
Buying a Business
By James McKenzie
As a real life business owner I can share with you "the truth" of what it is really like. Buying or operating a business is no easy task. Check out this informative guide about owning a business. If you are buying a successful business, want to know what questions to ask when buying a business, factors involved when buying a business, buying a business and the equipment, the view the Buying A Business link for more information. This is great if you are seeking small business credit and financing, small business online assistance, small business equipment financing, small business loans online.
If you are looking to buy a business for cash flow/ income - don't buy one.. People buy businesses for a tax right off or tax shelter. 4 out of 5 businesses loose money each year - I mean lots of money. That's why it's wrong to buy a business to rely on the income. If you do buy a business to rely on the income - go ahead and set up an appointment with a good chapter 7 attorney.
When I bought my business - I didn't have anyone that I could ask for experience. There seems to be so much reluctance from many to offer experience without having to pay for it.
I sure wish I could have read something like this before I made the purchase.
If you are a corporate person or have never owned or wanting to own a business -this is especially for you.
www.my-business-review.com/business.html [http://www.my-business-review.com/business.html]
This site provides real life information. I hope these pages might benefit you.
As a real life business owner I can share with you "the truth" of what it is really like. Buying or operating a business is no easy task. Check out this informative guide about owning a business. If you are buying a successful business, want to know what questions to ask when buying a business, factors involved when buying a business, buying a business and the equipment, the view the Buying A Business link for more information. This is great if you are seeking small business credit and financing, small business online assistance, small business equipment financing, small business loans online.
If you are looking to buy a business for cash flow/ income - don't buy one.. People buy businesses for a tax right off or tax shelter. 4 out of 5 businesses loose money each year - I mean lots of money. That's why it's wrong to buy a business to rely on the income. If you do buy a business to rely on the income - go ahead and set up an appointment with a good chapter 7 attorney.
When I bought my business - I didn't have anyone that I could ask for experience. There seems to be so much reluctance from many to offer experience without having to pay for it.
I sure wish I could have read something like this before I made the purchase.
If you are a corporate person or have never owned or wanting to own a business -this is especially for you.
www.my-business-review.com/business.html [http://www.my-business-review.com/business.html]
This site provides real life information. I hope these pages might benefit you.
Thursday, August 5, 2010
4 more questions to ask when buying a business
I gave you the 4 absolutely vital questions to ask before buying ANY business …, and here are some more, in response to Jeff’s quest to buy a business:
This week I found an air charter business for sale for 825K [AJC: Jeff is a navy pilot]. The sale price includes five airplanes (twin engine pistons) and the FAA certificates required to conduct flight operations for hire. Depending upon the condition of the airplanes, 825K, might just barely exceed the cost of the aircraft, leaving me the profits, employees, and business model for free.
According to the financials listed on the sales ad, the business brings in 600K in revenue and cash flows 216K. That looks like a 36% profit margin to me, which is good from what I can tell. The revenue comes 80% from freight and 20% from passengers. This tells me that the passenger focus I’m interested in is one that they either don’t have much market for, or maybe haven’t tried to exploit.
Needless to say, I’m intrigued. For significantly less than I think I need to start things with my original plans, I could buy an air charter that has airplanes, employees (and pilots), procedures and systems in place AND appears to operate profitably. That would leave me to try and expand the passenger side of the business and as/if it grows, I could slowly begin to acquire the aircraft necessary to take the business to where I want to try and go. All the while having the cushion of a profitable business model to mitigate much of the risk.
I’ve shot an email at the broker asking for more details about the business and the aircraft, but am wondering if you have any bits of wisdom and questions I should consider as I begin looking into the details?
So, the first four questions that I would ask are:
1. Do I understand the business?
2. Am I comfortable with management?
3. What is the business worth?
4. What do I have to pay?
… after those have been answered satisfactorily (i.e. now you are serious about proceeding), it’s time to get ‘down and dirty’ with these additional questions (some of which are specific to this business, but can/should be modified for any other ‘capital intensive’ business):
5. Do I want to own an air charter business?
6. If I did, would this be the TYPE / LOCATION of air charter business that I would want to own (at least, to start out)?
7. If I still did, would these be the type / qty / age / condition of aircraft that I would want (or, at least, could work with)?
8. What is the current value of the aircraft (what it would cost you to buy similar aircraft … NOT the value that they list on their books)?
The answers to these 8 questions will tell Jeff:
(a) if he wants to be in THIS business and,
(b) what he is paying for capital (i.e. aircraft) v goodwill (i.e. past/future profits, etc.)
… obviously, if Jeff could start a new business – from scratch – similar to this and ‘buy’ aircraft and customers, these answers will tell you him much time he can save by buying rather than building.
THEN, he should start looking at profitability, which will barely approximate the numbers that the seller provides to him ;)
If Jeff can buy the business for not much more than startup cost (better yet, USED aircraft acquisition cost), as he thinks he may be able to do, then he really only needs to assure himself that the business AT LEAST breaks-even.
Remember, if you undertake a similar analysis for a business that you may be looking at acquiring, when looking at profitability BE SURE TO INCLUDE a reasonable salary for yourself. Many owners ‘bump up’ their profit figures by taking their ‘salary’ out of profits rather than accounting for it as a salary. Is it a family business? They are rife with these kinds of practices …
To protect yourself against this kind of ‘profit inflation’, the question to ask is: “what would I pay for each job that needs to be done” and make sure that you build in the appropriate allowance, whether the current owners do or not.
And, just in case you’re also thinking of buying an air-charter business, here’s the additional questions that Jeff says that he’s started asking:
I’d like more details about the operations…typical freight customers and passengers, typical flight destinations etc…
Plans for future growth?
Condition of the aircraft? Hours, TBO, SMOH.
Expenses…typical employee salaries, pilot salaries, cost per flight hour of the aircraft etc.
Where is the business located?
Is there any real estate included in the sale?
Is the current owner willing to stay on during the transition to help ensure a smooth transfer and train the new owners as necessary?
There you go, a great place to start your questioning process, when looking to buy a business. Now, tell me about your experiences? :)
This week I found an air charter business for sale for 825K [AJC: Jeff is a navy pilot]. The sale price includes five airplanes (twin engine pistons) and the FAA certificates required to conduct flight operations for hire. Depending upon the condition of the airplanes, 825K, might just barely exceed the cost of the aircraft, leaving me the profits, employees, and business model for free.
According to the financials listed on the sales ad, the business brings in 600K in revenue and cash flows 216K. That looks like a 36% profit margin to me, which is good from what I can tell. The revenue comes 80% from freight and 20% from passengers. This tells me that the passenger focus I’m interested in is one that they either don’t have much market for, or maybe haven’t tried to exploit.
Needless to say, I’m intrigued. For significantly less than I think I need to start things with my original plans, I could buy an air charter that has airplanes, employees (and pilots), procedures and systems in place AND appears to operate profitably. That would leave me to try and expand the passenger side of the business and as/if it grows, I could slowly begin to acquire the aircraft necessary to take the business to where I want to try and go. All the while having the cushion of a profitable business model to mitigate much of the risk.
I’ve shot an email at the broker asking for more details about the business and the aircraft, but am wondering if you have any bits of wisdom and questions I should consider as I begin looking into the details?
So, the first four questions that I would ask are:
1. Do I understand the business?
2. Am I comfortable with management?
3. What is the business worth?
4. What do I have to pay?
… after those have been answered satisfactorily (i.e. now you are serious about proceeding), it’s time to get ‘down and dirty’ with these additional questions (some of which are specific to this business, but can/should be modified for any other ‘capital intensive’ business):
5. Do I want to own an air charter business?
6. If I did, would this be the TYPE / LOCATION of air charter business that I would want to own (at least, to start out)?
7. If I still did, would these be the type / qty / age / condition of aircraft that I would want (or, at least, could work with)?
8. What is the current value of the aircraft (what it would cost you to buy similar aircraft … NOT the value that they list on their books)?
The answers to these 8 questions will tell Jeff:
(a) if he wants to be in THIS business and,
(b) what he is paying for capital (i.e. aircraft) v goodwill (i.e. past/future profits, etc.)
… obviously, if Jeff could start a new business – from scratch – similar to this and ‘buy’ aircraft and customers, these answers will tell you him much time he can save by buying rather than building.
THEN, he should start looking at profitability, which will barely approximate the numbers that the seller provides to him ;)
If Jeff can buy the business for not much more than startup cost (better yet, USED aircraft acquisition cost), as he thinks he may be able to do, then he really only needs to assure himself that the business AT LEAST breaks-even.
Remember, if you undertake a similar analysis for a business that you may be looking at acquiring, when looking at profitability BE SURE TO INCLUDE a reasonable salary for yourself. Many owners ‘bump up’ their profit figures by taking their ‘salary’ out of profits rather than accounting for it as a salary. Is it a family business? They are rife with these kinds of practices …
To protect yourself against this kind of ‘profit inflation’, the question to ask is: “what would I pay for each job that needs to be done” and make sure that you build in the appropriate allowance, whether the current owners do or not.
And, just in case you’re also thinking of buying an air-charter business, here’s the additional questions that Jeff says that he’s started asking:
I’d like more details about the operations…typical freight customers and passengers, typical flight destinations etc…
Plans for future growth?
Condition of the aircraft? Hours, TBO, SMOH.
Expenses…typical employee salaries, pilot salaries, cost per flight hour of the aircraft etc.
Where is the business located?
Is there any real estate included in the sale?
Is the current owner willing to stay on during the transition to help ensure a smooth transfer and train the new owners as necessary?
There you go, a great place to start your questioning process, when looking to buy a business. Now, tell me about your experiences? :)
Characteristics - 5 Questions To Ask Yourself Before You Buy A Business
Here are five important questions that should be answered before beginning/buying a business. Set time aside where you won’t be interrupted and have an in-depth look at what you need to ask yourself. Be exceedingly honest.
1. Why do you want to buy a business? What is your motivation? Making money must be part of it – after all, a business has to make money. But, it takes more than making money to build excitement, energy and enthusiasm for a business. Does your focus and interest align with a particular business and direction? What are you excited about that will get other people excited to be employees, investors or customers of your business?
2. Do you understand the role you’re getting yourself into? The pluses are control, true freedom, prestige and a new level of community. Becoming a business owner and hopefully leader in your industry is an incredible lighter than air feeling. Owning a business requires you to be a leader of an organization. Are you comfortable leading? Do you like leading?
3. Being a business owner requires good decision making. Fast and confident. Business ownership is rejuvenating and will give you immense personal growth. On the flip side it can be very stressful. Can you cope with stress or do you get overwhelmed? Are you comfortable making decisions under pressure?
4. Do you know everything you need to know? If you answer yes, you’re wrong. No one (and I absolutely include myself here!) knows everything they need to know. The real question is, are you willing to accept the need to learn, and are you committed to learn?
5. Can you handle failures and mistakes? They will happen right along with success and rewards. Do you see them as learning steps or personal disasters? Are you ready to pick yourself up and keep going?
Beyond these questions – there are lots of questions about the individual business itself. Before you consider a particular business, spend time analyzing the above personality questions. The more you know your strengths and weaknesses, the better off you are and the better off your business will be. Good luck in your new business endeavor and having the guts to join the top 1%!
1. Why do you want to buy a business? What is your motivation? Making money must be part of it – after all, a business has to make money. But, it takes more than making money to build excitement, energy and enthusiasm for a business. Does your focus and interest align with a particular business and direction? What are you excited about that will get other people excited to be employees, investors or customers of your business?
2. Do you understand the role you’re getting yourself into? The pluses are control, true freedom, prestige and a new level of community. Becoming a business owner and hopefully leader in your industry is an incredible lighter than air feeling. Owning a business requires you to be a leader of an organization. Are you comfortable leading? Do you like leading?
3. Being a business owner requires good decision making. Fast and confident. Business ownership is rejuvenating and will give you immense personal growth. On the flip side it can be very stressful. Can you cope with stress or do you get overwhelmed? Are you comfortable making decisions under pressure?
4. Do you know everything you need to know? If you answer yes, you’re wrong. No one (and I absolutely include myself here!) knows everything they need to know. The real question is, are you willing to accept the need to learn, and are you committed to learn?
5. Can you handle failures and mistakes? They will happen right along with success and rewards. Do you see them as learning steps or personal disasters? Are you ready to pick yourself up and keep going?
Beyond these questions – there are lots of questions about the individual business itself. Before you consider a particular business, spend time analyzing the above personality questions. The more you know your strengths and weaknesses, the better off you are and the better off your business will be. Good luck in your new business endeavor and having the guts to join the top 1%!
Questions To Ask When Buying a Business – Why Work Like A Slave?
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Before Henry Ford wουƖԁ hire anybody fοr a vital position, һе′d һаνе lunch wіtһ tһеm. If tһе potential worker wουƖԁ salt tһе food before tasting іt, Mr. Ford wουƖԁ חοt hire tһе person. Tһе reason? Salting tһе food before tasting іt indicated tһе person wουƖԁ implement a рƖаח before testing іt – ergo, חο job. Wаѕ Henry Ford tοο extraordinary wіtһ һіѕ hiring policy based οח salting food before testing? Perhaps . Bυt, tһеח again, Henry Ford wаѕ America s first billionaire.
One company tһаt apparently didn t test enough іѕ tһе maker οf Excedrin. Many years back tһеу ran a multi-million dollar, state advertising campaign ѕһοwіחɡ different, above-average headaches аחԁ assigning tһеm numbers, Ɩіkе Excedrin headache nine, Excedrin headache twenty-three, etc, wһеrе Excedrin relieved tһе agony. Tһе campaign сrеаtеԁ ɡrеаt name recognition аחԁ wаѕ seemingly very successful. Bυt, іח truth, sales wеחt down. Tһе company later learned tһаt folks wеrе aware οf tһе campaign аחԁ ѕаіԁ tһаt Excedrin wаѕ аח ехсеƖƖеחt, stronger-tһаח-average discomfort reliever. Aחԁ іf tһеу′d a serious headache tһеу һаԁ a serious headache tһеу wουƖԁ ԁеfіחіtеƖу take Excedrin. Bυt іf tһеу headache, аח average headache, Excedrin wаѕ a more robust medicine tһаח tһеу needed, ѕο tһеу mіɡһt take a gentler agony reliever Ɩіkе aspirin. Tһе company сουƖԁ һаνе saved millions οf dollars аחԁ חοt lost market share һаԁ tһеу done one simple thing. TEST.
Once tһеѕе plain connections һаνе bееח mаԁе, tһеу seem ѕο apparent. Wе аrе аbƖе tο t believe wе didn t see tһеm sooner. Aח endless number οf tһеѕе unmade connections exist tο tһіѕ day, especially іח tһе business world. Yου аrе besieged bу easy, plain solutions tһаt саח dramatically boost уουr earnings, power, influence аחԁ success. Tһе difficulty іѕ, уου simply don t see tһеm.
Before Henry Ford wουƖԁ hire anybody fοr a vital position, һе′d һаνе lunch wіtһ tһеm. If tһе potential worker wουƖԁ salt tһе food before tasting іt, Mr. Ford wουƖԁ חοt hire tһе person. Tһе reason? Salting tһе food before tasting іt indicated tһе person wουƖԁ implement a рƖаח before testing іt – ergo, חο job. Wаѕ Henry Ford tοο extraordinary wіtһ һіѕ hiring policy based οח salting food before testing? Perhaps . Bυt, tһеח again, Henry Ford wаѕ America s first billionaire.
One company tһаt apparently didn t test enough іѕ tһе maker οf Excedrin. Many years back tһеу ran a multi-million dollar, state advertising campaign ѕһοwіחɡ different, above-average headaches аחԁ assigning tһеm numbers, Ɩіkе Excedrin headache nine, Excedrin headache twenty-three, etc, wһеrе Excedrin relieved tһе agony. Tһе campaign сrеаtеԁ ɡrеаt name recognition аחԁ wаѕ seemingly very successful. Bυt, іח truth, sales wеחt down. Tһе company later learned tһаt folks wеrе aware οf tһе campaign аחԁ ѕаіԁ tһаt Excedrin wаѕ аח ехсеƖƖеחt, stronger-tһаח-average discomfort reliever. Aחԁ іf tһеу′d a serious headache tһеу һаԁ a serious headache tһеу wουƖԁ ԁеfіחіtеƖу take Excedrin. Bυt іf tһеу headache, аח average headache, Excedrin wаѕ a more robust medicine tһаח tһеу needed, ѕο tһеу mіɡһt take a gentler agony reliever Ɩіkе aspirin. Tһе company сουƖԁ һаνе saved millions οf dollars аחԁ חοt lost market share һаԁ tһеу done one simple thing. TEST.
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