-Review financial statements to identify potential business problems. -Ask the current business owner to identify and disclose potential risks. -Read trade publications to get a sense of industry outlook and market conditions. -Hire a consultant or third party to analyze the current situation and business outlook.
Buying a business should be more than a straight-line analysis of facts and data. Entrepreneurs are creating entire new industries and business opportunities ranging from ultra quiet motorcycle mufflers to roller blades. There are more than 20,000 different types of businesses to choose from. The sheer number of different business opportunities is expanding every year. In order to locate successful businesses (many have not thought about selling ), you will need to examine a wide array of sources. There are hundreds of things to consider when buying a business. You need to be intimately familiar with each and every one of them. Therefore the would be difficult to outsource this to a consultant. They will not have the same perspective as you nor can they be familiar with every industry or business.
Reading magazines and trade publications is a good way to get information about the business, but you need information about every aspect of the business and no one single source can provide all that information. You will get information from the seller, employees, publications, and your own experiences. But the best source of industry and competitive data is a salesman. Pretend to be a customer or a “secret shopper” and ask questions; you will be shocked how much they have to say and will tell you if you ask.
You cannot rely 100 percent on the business owner to disclose everything. Often it is not in his best interest to disclose certain information. All he is concerned with is selling the business. As flawed as that type of thinking is, it is true. Use the seller’s answers as a base only. Seek out your own independent verification and information and then compare your own perspective to the answers provided by the owner.