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First of all, you need to decide what kind of business you want to buy. It is worth choosing among those industries with which you are familiar, because it is very difficult to succeed if you have no experience. If you lack experience, you may want to consider working with a business broker or commercial real estate agent. Qualified specialists can help you choose the best option for you, and will also be able to familiarize you with all the details and features of this or that type of business. After you have decided on the type of business you want to buy, the next equally important step is to study the reason for selling the business. Very often, the owners of the business that is being sold state that the reason for the sale is retirement or moving to another region, but there are often other hidden reasons, such as the damaged reputation of the company, problems with employees, the appearance of a serious competitor in the region or a difficult financial situation, and many others reasons That is why it is worth paying close attention to the study of this issue. The next, most responsible step before buying a business will be an assessment and analysis of the main elements of the enterprise's activities, for example:
Inventory, equipment and building
You should independently evaluate the inventory, check the inventory and assess its real value, as this is a key factor that affects the selling price of the business. It is important to obtain a complete list of the equipment with the specified name and model number, to estimate its value at the time of purchase by the seller, as well as its current condition and value. Assess the current condition of the buildings that you want to purchase, clarify what works on the improvement and conversion of buildings were carried out during the period of activity, as well as evaluate whether it will be necessary to make reconstruction or conversion of buildings for the implementation of your economic activity.
Contracts and legal documents
It is necessary to check all registration and statutory documents of the enterprise, sales or lease agreements, contracts with contractors or subcontractors, contracts with employees of the enterprise. If the property is rented, it is worth checking whether there are any restrictions on the further transfer of the property for rent, as well as what conditions and restrictions were agreed with the owner of the property that was rented.
Financial statements
One of the most important factors in evaluating the company's activity is its financial and tax reporting. If you are not a specialist in this field, you should use the services of a financial consultant or accountant for a professional evaluation of financial documents. It is worth evaluating the financial statements for the last 3-5 years, comparing them with the tax statements of the enterprise, as well as reviewing the dynamics of the enterprise's development in terms of financial indicators.
List of liabilities
Find out if the owner has used assets such as capital equipment or accounts receivable as collateral to secure short-term loans, if there are liens by creditors against assets, lawsuits, or other claims. Your accountant should also check for unrecorded liabilities such as employee benefit claims, out-of-court settlements being paid off, etc.
Accounts receivable and accounts payable
Check how accounts payable and receivable are serviced to assess how well cash flows are going. Check whether there are any overdue debts, as well as arrests imposed on the property in connection with bad debt service.
Customer patterns
If you have chosen a type of business that allows you to track customers, it is worth evaluating how many regular customers there are, how many are new customers. What is the general dynamics of customer growth, as well as to assess fluctuations in the number of customers depending on the season.
Reputation of the business
The company's reputation has a direct impact on its financial performance, therefore, before buying a business, it is worth assessing its reputation, for this you can talk to the company's customers, the bank that serves the business, suppliers, and other companies in the region.
Business location
It is necessary to assess the location of the enterprise, check whether there are no problems with logistics, what is the demographic situation in the region and the economic prospects of its development. It is also very important to study existing competitors in the region and assess the associated risks.
OSHA requirements
It is necessary to check whether the object meets the requirements of labor protection, and whether appropriate inspections have been carried out and conclusions have been given regarding the object's compliance with existing regulations.
