Chapter 5
Evaluating a Business to Buy
IN THIS CHAPTER
Conducting a comprehensive pre-offer evaluation of the company, its owners, and its employees
Investigating the company’s financial statements and lease contract terms
Considering the unique issues in franchises
Before you make an offer to buy a small business, do some digging into the company to minimize your chances of mistakenly buying a problematic business or overpaying for a good business. This investigative process is known as due diligence, and it’s every bit as important as hiring an attorney or signing the purchase agreement.
Smart buyers build plenty of contingencies into a purchase offer for a small business, just as they do when buying a home or other real estate. If your financing doesn’t come through or you find some dirty laundry in the business (and you’re not buying a laundromat), contingencies allow you to legally back out of the deal. However, knowing that all your purchase offers will include plenty of contingencies shouldn’t encourage you to make any purchase offer casually.
Making an offer and doing the necessary research are costly, in both time and money, but you’ll be glad you did both after the
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