When most people think to start a business, they think about start it from scratch (or it can be said building it from the ground and grow it up by themselves). Actually, it is a kind of business which takes risk much more than just buy a business idea that has already existed and well-known by people.
When you start your business from the ground, the difficulties may include looking for customer base, the strategies places, the budget, hiring employees, and the right system of business that you should know well if you do not want to your business collapse in the middle of working.
By buying the existing business, those problems can be minimized. However, it may cost more expensive because of the reputation that the companies has built for many years and the lower risk that you will get than building it from the ground.
First is copying all contracts and legal documents which are important in that business. The contract includes all leases and purchase agreements, subcontractor agreements, employment agreements distribution agreements, union contracts, sales contracts and other instruments which are used to bind the business legally.
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Do not forget to evaluate all other documents like article of incorporation, copyrights, registered trademarks, patents, fictitious business name statements, and others. To buy a business idea with valuable intellectual property, you should consider to have the attorney evaluates it. if you want to buy a business kind f real estate lease, it is important to get to know if it is transferable, its terms, the ages of the owner ruins this business, and if the landlords want to give his or her permission for the assignment of the lease.
Second is getting to know well about the furniture, equipment, fixture, and the building. It includes assets of the business, office equipments, and all products. It will be good if you can get lists from the seller which includes their names and model numbers of all the equipment that they bought from your business.
Then you can determine the present condition, compared the present market value and the market value when it is purchased, and whether those equipments were leased or purchased. In order to keep the good condition in all facilities, you should know how much the seller invests in your leasehold maintenance and improvements. Also, if you want to buy a business idea, it is needed to determine what the best modifications that you should do in order to suit your needs.
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The third is evaluating the business’ financial statements for at least past five years. For the beginning, you should evaluate this statement includes all the financial and book records, then compare it to the tax returns. It is important to determine the business earning power. The ratios of sales and operating system should be examined well with the help from expert accountant who is familiar with the business that you are operating. It will be a good beginning when you want to buy a business idea.
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