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    6 Replies Latest reply on Apr 16, 2009 7:29 PM by BobbySimons

    Buying a business

    west23 Wayfarer
      In the process of dealing with the business owner wanting to transfer it ot me, I asked to see her tax report of previous years, which was declined! She told me that she's transfering the business name and the inventories only, not the responsibilities, debts, she does not want to let me see them!

      I told her that I will have a lawyer to have a look into the paperworks, she said "no objection, as long as you are willing to pay for it!"

      Is it OK with that? Please advise!
        • Re: Buying a business
          phanio Pioneer
          Why will she not show you her financials - tax returns? Seems a little odd to me - is she hiding something? You should pay for your own dilligence as it will only help you make better decissions. Still don't understand what she is hiding. Make sure she is not in default on anything - even if she sells you the business - her creditors could still have claims (liens) on it. Might try contacting your Secretary of State's office - your local IRS office - and the Better Business Buearu to see if they have anything negative about her.

          Business Money Today
          • Re: Buying a business
            BizOptimizer Adventurer
            Sounds like you and the business owner are somewhat innexperienced? That is a hard nut to crack as neither really understand the complexities and both stand hard on fear and trust issues.

            Not sure you want to crank up a full time attorney to settle the issues on a deal that may never go through. That would/could be big money down a deep hole.

            Not having enough experience, or buying a bad deal can be very painful. Maybe you work with a business broker and learn - they only get paid if you buy. At the same time, the right one can bring you - and maybe even the business owner to reality. Look at similar businesses - maybe you'll like one of them better and that will give you more leverage.

            If you are buying the business, you need proof of cash flows - period! If you are buying the assets of a failed business - then maybe cash flows are less important to determining value. However, if you don't have a LOT of experience in the business - you'll want to learn from the cash flows either way!

            Many small business owners fear allowing others to see the books that they themselves don't understand - and someone may "get something over on them". You have to explain that you aren't the tax man - you just want to find out what the business is/was capable of.

            Good luck - seek guidance - but not $400/hour guidance yet.
            • Re: Buying a business
              BizOptimizer Adventurer

              replying for the 2nd time as 1st time didn't show up. If duplicated - sorry.

              Sounds like both sides may be a little innexperienced in the buying process. If so, and there is no broker involved - not sure you want to crank up a lawyer at hundreds/hour unless you have done all your dilligence and ready to sign.


              Maybe get a broker involved - maybe let a broker show you similar businesses that will either be more tempting or give you some leverage. Most businesses don't sell - you are in the driver's seat - but you need to know how to drive.


              Brokers don't get paid until they educate both sides to an agreement. They can also guide you through valuations, etc. If this is your first, you don't want to do it alone. Buying the wrong business with wrong terms can devastate your life - VERY serious - be careful.
              • Re: Buying a business
                jgr1820 Newbie
                Unless you (or any other potential buyer) are paying cash for this business, at some point the current owner is going to have to fork over her paperwork. If you are looking to finance this purchase with through SBA or bank loan, line of credit, etc., this is a requirement from any of these agencies. In addition, those documents more than likely will need to be certified by an accountant. (As was my case when I went through this process last month)

                Personally, I wouldn't touch it if she is unwilling to share this information at will and is requesting payment for it - either she has something to hide, the business is not as profitable as she may have led you to believe, or has some kind of creative bookkeeping that is questionable.
                • Re: Buying a business
                  Bridge Navigator
                  What is she "transferring" to you? The business as an ongoing concern or just selling you some assets?

                  Does she own the assets free and clear or are there leins on theM? You will need to do a UCC check.

                  What dollar amount are you talking about?
                  • Re: Buying a business
                    BobbySimons Wayfarer
                    That makes no sense. She is more than likely hiding the fact that the business is mimally profitable. Under no circumstances should you purchase a business without seeing the historic financials. How would you even know how much the business is worth without seeing them?

                    Tell her that no financials = no deal.

                    I've reviewed 100's of business acquisitions as a lender and in 100% of cases, financials were available.

                    This person you are dealing with is either an idiot or hiding something. Maybe both. It's standard practice for sellers to disclose financials. If they want to get paid, they need to pony up the numbers. That is not something you should pay for.