Due Diligence Before You Purchase a Business

If you are considering opening your own business - but don't have a burning idea or specific dream in mind, you may want to capitalize on someone else's idea. Franchising may be one possibility of doing this. The disadvantages of franchising may dissuade an entrepreneur from this choice. Franchises can run thousands of dollars to start up as well as a monthly residual fee. And for those who want to be her or his own boss, the restrictions placed on franchisee decisions by the franchisor may make the idea unattractive. Have you considered buying an already established privately owned business? Just because they were not successful, does not mean you won't be. The key is "Due Diligence"

The best place to starting looking for an established privately owned business is on the Internet at sites that advertise Businesses for Sale. You can also check out the local paper online or in print, or enlist the services of realtors. Keep in mind, however, that most businesses listed with realtors are going to be brick and mortar locations that won't fulfill a dream of a work from home business opportunity.

After you find a business, do your "Due Diligence". This means you need to conduct a thorough review of the finances of any business you are considering. Income statements should be examined, as well as statements of cash flow and balance sheets. The potential buyer must keep in mind that liabilities are crucial, as typically she or he would inherit these debts when saying yes to the opportunity to buy this work from home business. Review the company's credit report for anything out of the ordinary. Check out their Dun and Bradstreet report. Develop a relationship with an accountant who can review the statements and offer their opinion.

A business owner who is selling his or here work from home opportunity should supply potential buyers with their "Due Diligence" package. This should contain not only tax returns for prior years but also any significant contractual obligations the business has
entered into including property leases. Contractor or employee agreements should be a part of the package as well. Articles of incorporations and any lawsuit should be included.

"Due Diligence" may not provide all of the information regarding the business if something is left out. Have an attorney verify all legal documents to see what your recourse would be if something has been intentionally left out.

It may sound expensive to hire an attorney and an accountant to just review documents, but it may cost you more in the long run if you don't!