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A good marketing package provided to you by the Business Broker will cover the history of the business, products or services offered, the number of employees and their longevity with the company, the hours and days the business is open, the competition, the client base, and areas of possible future growth.  It will also include the list of assets with their total market value and the amount of inventory at wholesale value.  Of course, a minimal amount of financial information will be included.  Assets are usually not priced individually unless the amount of the cash flow does not justify the asking price.  Part of the due diligence will be to verify the amount and value of the inventory.  The actual cost of the inventory will be used for the closing, so this variable can increase or decrease the final selling price.  It is important to set a limit in the Offer to Purchase as to how high or low the inventory can be.  It is easy when a business has a good inventory control system, but some businesses do not have an accurate written inventory.  

To help you get started in the thought process of possible requests and questions to ask, here are a few suggestions:

Books and records to review, including all monies received and all expenditures, at least for one year.

Income tax returns for the past three years.

Financial statements for the past three years.

Up to date financial statement for current year.

After reviewing the financials, you will likely have a list of questions concerning items on them.

Are all taxes up to date?

Bank statements for previous year.

Procedure for handling late payments from customers.

How long have you leased (or owned) the building?  Could it be purchased now or at a later date?  Is it possible to do a lease/purchase of the building?

If the business does not require customers to come to the business, how would the business likely be affected if it is moved to a different location?

How old is the equipment?  Everything must be in working order at closing.

Is any of the equipment leased or is it all owned?

Do you have a business plan and a marketing plan?  Are they available?

How have you marketed the business?

What would your customers say you do best?  Why do they come to you instead of your competitors?

Who are your competitors and what are their strengths and weaknesses?

What percentage of your business is repeat business?

Do you have a website?  If so, how is it used?  If not, why not?

List of employees, amount of time with the business, and the amount paid to each.  Are they full-time or part-time and what are the responsibilities of each?  If sellers do not want to give the names of their employees at this time, they can be listed without their names.

Do you think the employees will want to stay after the business is sold?

Current contracts and leases.

If a franchise, name of franchisor to contact.  Copy of franchise agreement.

The types of insurance the business has, the carriers, and the amount paid to each.  The seller will cancel his/her insurance, but this will help you in your selection of insurance.

Describe your ideal buyer of this business.

What do you most/least like about the business?

If you were starting out again, what would you do differently?

What licenses are required for the business?  What skills or education are required to get the licenses?

What is the length of time you will work with me for training after closing?  It is never a good idea for a buyer to work or train in a business until after closing.  There can be several reasons, but an important one is the confidentiality.  The buyer and seller do not want anyone, including employees and customers, to know the business is selling until after closing.  After closing, they can meet with the employees together.  

The one question the buyer does not ask the seller is how much he/she will take for the business.  That should never be discussed, as it must be presented in writing in a Letter of Intent or an Offer to Purchase so there is no misunderstanding as to what is said.

These are just some suggestions to get you started.  With all of the information you obtain, you will want to write a business plan and think of ways you can improve the business and increase the profit over the years ahead.

  • Author: Pat Jones
  • Title: Business Broker - Owner
  • Company: Pat Jones Business Brokers
  • Company Website: http://www.patjones.biz/
  • Date: May 19, 2016
  • Category: Buying a Franchise or Business
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