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What to Look for When Buying a Business
 Lou Termini
To buy a business, you should check a number of aspects of the business before making the commitment and spending your hard-earned money.
Existing Sales
What have the sales been? What is the sales trend? If it is a down trend, ask why and consider the possibilities that the concept is dated and consumer interest in the core product is declining. Possibly, new competition has emerged and is cutting into sales.
Buy a Business that Shows Profits
Is the business profitable? Can the seller prove it with income tax returns? Many consider the profitability measured against the investment amount. In today's economy, many buyers believe that one year's profits should equal at least 50% of the investment.
Lease
Does the business operate in a leased storefront? If so, then the most important questions are how long is left on the original lease and does the rent equal no more than 12% of sales. For you to have made a sound investment, you should have at least 5 years of life left on the lease – and preferably 10 years. Simply, some day, you may want to sell the business. You need to have at least five years of lease life remaining to be able to sell it.
To be profitable, generally, you may not pay more than 12% of your sales in rent. This rent amount must also include any property taxes and common area maintenance charges ("CAM”).
Training
Will your seller provide adequate training? This is important to maintain the same level of service and steady quality that has been experienced by customers before the sale.
Lifestyle Adjustments
Will owning and operating this business take a toll on family life as you have come to expect up to now? Many new business owners fail simply because the business won't fit in with kids, spouses, etc.
To Buy a Business, Get a Lawyer
Most people have never been involved in buying a business before. Having a lawyer guide you may be the difference between making a good deal and a bad deal.
Good Luck!
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