Buying a business can be very exciting. Here are some general issues and questions that should be considered:
– Why is this person selling?
– What is the valuation?
– Are the key customers and employees staying?
– What is the nature/type of transaction to be used for this purchase – asset or stock? Buyers typically want to do an asset sale to reduce their liability while sellers typically want to do a stock sale for favorable tax purposes.
– Will the seller execute a non-compete agreement and for how long? You don’t want the seller setting up shop next door and provide the same product or service.
– Perform a title search on all assets and a background search and credit report on the seller.
– Who will be/are your competitors?
– Compile financial projections to ensure the business will be profitable and can pay the debt service?
– What type of accounting software do they use?
– What type of internal control systems does the seller currently have in place?