what questions to ask when buying a small business?

Answer 1

There's a lot of questions that should be asked,, and the answers should be verified by substantial evidence of credibility. Some of the more important questions are;

1. What was the gross & net income for the past 3 years? Examine tax records to verify.

2. Are there any pending legal matters? This would include any law suits, court judgements, liens, outstanding debt obligations, business license suspention/revocation, labor disputes, tax due/unpaid, unresolved claims and/or any warnings or citations for the violation of local ordinances that govern the operation of the business. Any sales contract should indemify the buyer, holding him/her harmless against any claims.

3. If the business is profitable,, why is it for sale?

4. Is there any plans to develop the area/location surrounding the business that would have a detrimental effect on the business?

Answer 2

Have your accountant or attorney run local, state and federal tax inquiries to make sure all business taxes have been filed and paid.

Why are you selling?
Can I talk to a few of your customers and vendors?
Have you overdrawn your bank accounts in the past 2 years?

Also, see if you can just hang out and see the business run for a couple days. Don't let them put you in an office by yourself, you need to hear how much the phone is ringing, see the employees in action, and see if they are getting any bad notices in the mail.

Good luck to you, my hubby bought a small business that was mis-represented and 5 years later we are still fighting to keep it out of bankruptcy.

Answer 3

Ask yourself "Why am I asking this question on Yahoo answers?" then find some one who has experience with small business transactions and pay them for some consulting. It will be money well spent if they are able to guide you to see when potential shortcomings are that may cause yuo to want to lower your asking price. It is easier to lower your price if you have a solid justification for not being confindent in the aksing price.

Answer 4

What is net income? do u documented it? any tax returns to prove the income?
How long u r running this?
which s busy peroid in the year and day?

Answer 5

You need to make sure you get an honest answer to this one- why is the current owner selling?