Chapter 8

Evaluating a Business to Buy

In This Chapter

arrow Conducting a comprehensive pre-offer evaluation of the company, its owners, and its employees

arrow Analyzing the company’s financial statements and investigating the lease contract terms

arrow Considering the unique issues in franchises

In the American legal system, a person is presumed innocent until proven guilty beyond a reasonable doubt. When you’re purchasing a business, however, you should assume that the selling business owner is guilty of making the business appear better than it really is until you prove otherwise.

We don’t want to sound cynical, but more than a few owners have tried to make their businesses look more profitable, more financially healthy, and more desirable than they really are. The reason is quite simple: Business sellers generally seek to maximize the price their businesses will command.

Buying a business can be tricky because the business brokerage market rarely favors the buyer. The following list presents some of the obstacles you’re likely to encounter when buying a business:

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