Buying a Business Checklist

Buying a business checklist includes main questions which should be researched and considered when entrepreneur wants to buy a running business. The information which should be gathered in order to investigate the situation within the enterprise can be obtained by interviewing the seller, personnel and studying business documents. The checklist can be easily modified and supplemented according to specific requirements.

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Business financial affairs:

• Get access to financial information

Buyer should demand access to business financial records from seller. Financial information is critically important for understanding of the past profitability of the business.If the seller cannot provide information the buyer has the right to cancel negotiations. Besides, the financial documents are required to get the loan from bank.

• Determine the price and what assets are included in the sale.

Define what realty, goodwill, equipment, inventory etc. are included in the sale and what is the actual market price of the property.

• Determine if it will be asset or stock purchase.
• Research if any business obligations or debts will be inherited
• Learn business balance sheets and income statements for at least three years and for current year, study business tax returns for past three years.

Ensure that all past taxes are paid

• Determine additional working capital that will be needed to keep business running after the sale.

Enterprise/Operational/ Personnel Information:

• Find out business history.

Get the information regarding following: business reputation, date when it was established, history of development, business ownership structure.

• Get the copy of franchise agreement if it is used in business, learn franchise fee or a transfer fee have to be paid.

• Identify if some improvements, upgrades or changes within business operations are required and what would be the costs of possible new equipment purchases/ leaseholds, new technologies and so on.

• Get the copy of unsigned proposed buy/sell agreement. Study proposed terms of the buy/sell transaction.

• Research if business has any running leases for property, equipment etc and if these leases are transferable.

• Research local laws to assure compliance.

• Demand from seller an explanation of his/her reasons to sell the business.

• Determine if you will be able to continue using of the enterprise’s business name, patents, trademarks, trade secrets, product names and any other proprietary information.

• Find out if any licenses will be required to maintain business operations and what are the costs.

• Determine if the seller will enter a non-compete agreement after transfer of ownership.

• Determine if there are any customer product warranties issued by the company that may be future obligations.

• Learn the company staffing requirements/policy and key employees.

Analyze the roles and salaries of all employees in the business. Decide if you will keep the existing situation or perhaps some changes are required.

• Research existing employee contracts and benefit packages.

• Determine if existing employees will stay within the business after the ownership is changed.

• Determine if the seller agrees to stay in the company for ...

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