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    3 Replies Latest reply on Sep 6, 2008 10:40 AM by LUCKIEST

    questions about buying a establised business/franchise

    angelbaby Newbie
      Im looking into buying an established business/franchise. A little packing and shipping mail place. What I am wondering is if anyone who has purchased a business like this could give me some pros and cons. I also am interested in any pitfalls or obstacles you may have come across in the process and overall how it has worked out for you. Any info at all is helpful.
      Thanks Angel
        • Re: questions about buying a establised business/franchise
          Tracker

          There are a lot of important things to cover when buying a business. So it is not practical to put them all here in reply to your question. But I will list here the high points that you should look at first:

           

          • What is the reason for the sale? Is the owner selling because he "wants" to do something else with is life or he "needs" to because he sees the business not doing as well in the future as it has in the past. The real reason for selling is very important to determine early on as best you can.

          • With this type of business I'm sure that location is important. Is the traffic (I'm talking flow of people/customers/prospects etc.) volume in the area steady, going up, declining? Is the area growing, flat or declining? Does your city have any planned construction over the next 3 to 5 years that will disrupt access to the business? I have seen location sensitive businesses go out of business because of highway construction disrupting the traffic (of cars and people) in the business area.

          • What is the revenue and net income of the business for the past 3 to 5 years? Check their financials for the last 3 years and see how sales and profits are trending. Are they going up, flat or declining?

          • What do they forecast for the next 3 to 5 years? And are the projections realistic.

          • How strong is the balance sheet ... i.e. are there assets with value and is the business carrying debt? If there is any debt, can it be assumed?

          • Do they have appraisals to prove any value they are putting on the assets?

          • Have they established an asking price? Do you know what they are basing their asking price on? Is that a realistic, fair and acceptable price?

          • Will the owner carry back any financing?

           

          I think with this business it is going to be important to establish the stability of the revenue (over the past 3 to 5 years and going forward for the next 3 to 5 years). Another thing to look at would be operating expenses. Are there any opportunities to reduce expenses and what it the outlook that you will face higher operating expensed than the current owners? And the question about the traffice flow, location and any planned highway construction is important to look at as well.

           


          There are many more questions but the above will be critical when it comes to initiall checking out the business as part of your due diligence.

           


          I hope the above helps you or gives you some direction.

          Dennis Lowery
          Adducent, Inc.
          • Re: questions about buying a establised business/franchise
            LUCKIEST Guide
            questions about buying a established business,

            Welcome and good luck. tell us more. where are you??

            Go to Members page and share some info.

            Do you have an Accountant??., Lawyer??

            Have you seen the books and records (like tax returns)??

            LUCKIEST