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Decisions >> Business / Organization / Employer >> Business Development and Growth >> Growth Opportunities

Choose an Existing Business (Non-franchise) to Buy

  Use MyDecisionHelper to help you decide which existing non-franchise business to buy. What should you consider in buying a business? Ask the right questions and see the best fit for you. MyDecisionHelper helps you choose the best non-franchise business opportunity for you.

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Other related decisions where we can help you:

If you....

  • need to choose a Business...
  • want to minimize the chances of making a mistake....
  • need some help organizing your thoughts...
  • want to be sure that you make the best choice for your Business...
  • need to be able to explain your reasons...

MyDecisionHelper can help you!

We will guide you through the following steps:


Step 1: Discover what is important to you.


Step 2: List your choices.


Step 3: Evaluate each choice.


Step 4: Review the results.


Based on your values and needs, MyDecisionHelper will show you the ranking of each Business being considered.
MyDecisionHelper will highlight your best choice and will let you review and tweak every aspect of the Decision process to ensure you make the best decision possible. MyDecisionHelper provides useful charts and reports to help you understand and explain your decision!

Here are some of the things we'll help you consider:
  • Location
  • Business Characteristics
  • Due Diligence
  • Purchase Considerations


When making a decision like this many people use the list below. We will use this list to help you make your Decision. You can modify it to fit your needs or situation.

 Name          Description
General business considerations How well do you rate the general business considerations surrounding the purchase of the business? (Consider location, years in business, growth potential, reasons for selling and due diligence results.)
Growth potential What are the growth avenues for this business? (Consider geographic, web-based, physical plant, new products, etc.)
Business location – general Is location, in general, critical to the success of this type of business?
Due diligence How available are key documents for a thorough due diligence process on the business? (Detailed review and verification of financial records, contracts, major clients, regulatory compliance, etc.)
Due diligence results How good are the due diligence results for the business you are looking to buy?
Years in business How do the years in business for this company add to the probability of success?
Reasons for selling What are the reasons the business is up for sale?
Business reputation What is the current reputation of the business with its customers, suppliers, employees, community, etc.?
Business location – local How good is the current business location for continued operation? (In-town, suburbs, industrial, rural, etc.)
Conveyance of existing business What benefits will you derive from the purchase of the existing business? (Consider traffic, existing contracts, customer base, goodwill, etc.)
Personal considerations How well does the purchase of the business fit your personal considerations, such as knowledge of the business type, industry knowledge, skills and interests, reasons to buy and entrepreneurial fit?
Knowledge of business type How well do you know the general type of business you are considering, i.e., manufacturing, wholesale, retail, etc.?
Industry knowledge Evaluate your overall industry knowledge, including contacts with suppliers and customers.
Skills and interests How well do your skills and interests fit the business?
Commute time How acceptable is the commute time to the place of business?
Reasons to buy What are your reasons for buying the business?
Entrepreneurial fit How well does the business model fit your entrepreneurial personality?
Market considerations How do you rate the company’s overall market situation, including market size, position, expansion, etc.?
Market position How do you rate the company’s position in the market? (Consider innovation, advertising, image, etc.)
Market size How do you rate the size of the company’s market? (Local, regional, national, international)
Market expansion – overall How well is the overall market expanding for the company’s products and services?
Market expansion – local How well is the local market expanding for the company’s products and services?
Financial considerations How do you rate the overall financial aspects of the purchase, including purchase aspects, financial information, asset and liability considerations, discretionary earnings and financial ratios?
Purchase overview How do you rate the overall purchase considerations, including price, down payment, options, capacity, reserves, etc., for the business?
Purchase price How reasonable is the proposed purchase price?
Down-payment How reasonable is the down payment required keeping in mind it could change the quick and current ratios of the business?
Purchase capacity How financially capable are you to purchase the business?
Cash reserves What is your ready access to cash if operating cash flow does not support the business?
Seller’s options What seller purchase options are available?
Financial information How well does the overall financial information available support the purchase of the business? (Consider accuracy, timeliness, outlook, business value, discretionary earnings, tax benefits, etc.)
Trust in financial information What is your trust level in the financial data provided?
Timeliness of financial information How do you rate the frequency operating financial data is generated?
Financial outlook How do you rate the financial outlook for the business, including revenue sustainability, cash flow, assets, liabilities, and performance projections?
Gross revenue sustainability How sustainable are the gross revenues after purchase?
Gross (not Net) profits Are the gross profits for this business within norms?
Net (not Gross) profits Are the net profits for this business inline with norms?
Cash flow How well does the business generate the cash needed to operate? (Review avg. A/R, avg. A/P, avg. OH, inventory levels, etc.)
Gross revenue Are the gross revenues of the business acceptable for the proposed purchase price?
Performance projections How realistic are the performance projections based on the last 3 years' operating history?
Asset base How viable is the overall asset base transferred in the purchase? (Consider land/property, building(s), furniture/fixtures/equipment, inventory, goodwill, etc.)
Liability exposure What is your overall exposure to any liabilities assumed in the purchase? (Consider excess mortgages, over-leveraged purchases, etc.)
Inventory assets Are the inventory assets, if any, a good value for the proposed purchase price?
Value considerations How well do the various value determinations (book value, appraisals, fair market value, etc.) support the asking price?
Book value Does the book value of the business provide reasonable coverage if faced with liquidation?
Book value appraisals Do you have professional appraisals for real estate and equipment valuation?
Fair market value Is the fair market value for the business inline with the asking price?
Goodwill How well does the business cash flow and general attractiveness of the business support the goodwill amount included in the proposed purchase price?
Purchase price valuation How reasonable is the business valuation?
Third-party valuation Do you have a certified third-party valuation of the business?
Third-party valuation results How well does the third-party valuation support the asking price?
Discretionary earnings How well do the projected post-purchase discretionary earnings of the business support owner compensation, equipment investment, note payments, and taxes? (Profits before income tax, depreciation, interest, owners benefits and compensation)
Tax benefits Do you have any tax benefits available through the purchase of the business?
Ratios How good do the quick and current ratios look both pre and post purchase?
Quick ratio pre-purchase Evaluate the quick ratio (cash + equivalents / liabilities) prior to purchase. (Banks prefer 1.00 – 1.25 or better)
Quick ratio post-purchase Evaluate the quick ratio (cash + equivalents / liabilities) after the purchase. (Banks prefer 1.00 – 1.25 or better)
Current ratio pre-purchase Evaluate the current ratio (current assets / current liabilities) prior to purchase. (Banks prefer 2.0 or better)
Current ratio post-purchase Evaluate the current ratio (current assets / current liabilities) after the purchase. (Banks prefer 2.0 or better)
Operational considerations How well do the overall operational considerations, such as facilities, staff, support, advertising, operational improvements, etc., support the purchase of the business?
General operational aspects How well do the general operational aspects support the purchase of the business? (Consider facilities, FF&E, your involvement, hours of operation, operational improvements, supplier considerations, etc.)
General facility How well does the facility meet your needs to sustain and grow the business?
Quality of FF&E What is the condition of the furniture, fixtures, and equipment?
Owner’s involvement How involved must the owner(s) be in day-to-day operations?
Hours of operation How reasonable are the hours of operation for the business?
Market flexibility What is your ability to adjust to local market conditions? (Consider changes in hours, pricing, advertising, product mix, suppliers, etc.)
Existing contracts How good are the existing contracts, if any, that will convey with the purchase?
Operational improvements What is the level of required operational improvements?
Employee acceptance to operational change How accepting will employees be to operational changes?
Supplier availability How generally available are suppliers you need for the business?
Supplier reliability How reliable are the current product/service suppliers?
Supplier pricing/incentives How competitive are the pricing and incentives offered by current suppliers?
Staff considerations How well do the overall staff considerations, such as recruitment, training, retention, etc., support your purchase of the business?
Staff recruitment What is the general market availability for employees? (Consider new, additional, replacement, entry level, experienced, etc.)
Staff training availability What are the available training resources for new/existing employees? (Consider inside, supplier/partner provided, paid outside, etc.)
Staff training requirements What level of new/existing employee training will you need?
Staff expertise What is the current staff’s expertise in the business?
Staff retention post acquisition What is the level of current staff that will remain after the purchase?
Staff replacement What are the staff replacement requirements?
Additional expertise What additional staff expertise will you need?
Support How do you rate the levels of support you will get with the business purchase? (Consider professional services, operational support, restrictions, etc.)
Professional services What level of outside professional services will you need? (CPA, attorney, consultants, etc.)
Operational support provided What level of initial operational support will others provide?
Operational support needed How much initial operational support will you need?
Operational restrictions What are the operational restrictions imposed on the business?
Advertising How well does the overall advertising support, including levels, partner supplied, wholly paid vs. co-op, etc., encourage your purchase of the business?
Advertising – General What total level of advertising do you need to sustain and grow the business?
Advertising – Partner How do you rate the level of “free” advertising provided by outside sources? (Consider national, supplier, other partners, etc.)
Advertising – Wholly paid What level of advertising does the business pay for wholly?
Advertising – Co-op How much co-op advertising is available to the business?
Contractual considerations How well do the overall contractual considerations, such as confidentiality, purchase terms, transition, purchase options, etc., meet your needs?
Confidentiality/nondisclosure Do you have a confidentiality and nondisclosure agreement in place between you, the seller, and any business brokers involved in the purchase?
Escrow/Closing attorney Do you have an escrow and closing attorney to represent your interests in the transaction?
Purchase terms How well do the financial terms of the purchase agreement and/or your pre-arranged financing meet your needs? (Consider down payment, interest rate, repayment term, monthly payment, etc.)
Transition period How reasonable is the operational transition/start-up period in the purchase agreement?
Purchase options Are you exploring all of your possible purchase options, including merger, leveraged buyout, asset vs. stock transaction, earn-outs, etc.?
Merger, except in a leveraged buyout Do you have professional advice regarding a potential merger of the business after or as a part of the business acquisition?
Asset vs. Stock transaction Do you have professional tax and legal advice regarding the preferred transaction form considering the complexities of the purchase?
Leveraged buyout (LBO) Do you have professional financial, tax, and legal advice if you anticipate purchasing the business through a leveraged buyout?
Earn-out Do you have professional advice about the viability of earn-out provisions to facilitate better purchase price and terms?
Due diligence overview How well do the due diligence results, including accounting (financial), inventory, liabilities, taxes, legal, regulatory, and insurance issues, support your purchase?
Accounting due diligence How well do the accounting due diligence results support the purchase price? (Consider accounting method, revenue recognition, recasting of financials, employee compensation, inventory, receivables, payables, etc.)
Accounting method How appropriate is the accounting method used for this type of business? (Consider cash vs. accrual)
Revenue recognition Is the revenue generated from large and/or long-term contracts properly recognized in the financial statements? (Review all large and/or long term contracts)
Recasting of financials Have the financial statements (P&L and balance sheet) been recast for proper accounting methods and to show hidden costs, if any?
Employee compensation How well does overall employee compensation compare with the norms for this type of business?
Wages and salaries Are the employee wages and salaries inline with industry and local market norms?
Commissions and bonuses Are commissions and bonuses, if any, within the norms for this type of business?
Deferred compensation What is the level of deferred compensation, if any, for employees of the business?
Inventory due diligence How well does the inventory due diligence support the asset value carried on the books? (Consider inventory for resale, obsolete inventory, inventory method, equipment, furniture and fixtures, etc.)
Inventory for resale How current is the latest physical inventory?
Inventory – obsolete Does the inventory value of items for resale show adjustments for obsolete, damaged, or otherwise unusable items?
Inventory system Is the inventory method used the most appropriate for this type of business? (Consider LIFO, FIFO, average cost, etc.)
Equipment inventory Is there a complete, detailed, and accurate inventory of all equipment that will convey with the business purchase?
Furniture and fixture inventory Is there a complete, detailed, and accurate inventory of all furniture and fixtures that will convey with the business purchase?
Receivables due diligence How well is the true value of receivables accurately reflected in financial statements? (Consider receivables accuracy, status, collection, questionable, bad debts and reserves, etc.)
Receivables collection How collectible are the majority of the receivables, if any, for the business?
Receivables accuracy How accurate are the receivables, if any, for the business?
Receivables status How good is the payment flow for receivables, if any, for the business? (Consider 30, 60, 90, over 90 days)
Receivables – questionable Are any receivables questionable or uncollectible?
Bad debts Is the level of bad debts, if any, within norms for the type of business?
Bad debt reserves Do the financial records reflect adequate bad debt reserves, if needed, for the business?
Liabilities due diligence How well disclosed are the full liabilities to be assumed, if any?
Liabilities What is the overall payment status on short and long-term liabilities?
Liabilities – balances Are the balances for liabilities shown on the financial statements accurate?
Liabilities – collection Are any assets currently threatened by foreclosure, repossession, or court orders, etc.?
Tax due diligence How fully and accurately are tax related issues documented and disclosed?
Tax payments How good is the documentation showing that tax payments were on time?
Taxes Are all taxes for the business current? (Consider payroll, sales and use, income, real estate, etc.)
Tax return preparation Have the prior business tax returns been prepared properly?
Tax returns Have you had 3 years of business tax returns reviewed by a competent professional?
Legal due diligence How well are legal contracts documented and disclosed? (Consider non-compete covenants, intellectual property, material agreements, client contracts, supplier contracts, etc.)
Non-competition covenants Are non-competition covenants, if any, associated with your purchase fully disclosed and reasonable? (These can be beneficial or harmful.)
Non-competition covenants value How would you rate the value of non-competition covenants, if any, to your purchase of the business?
Litigation Is there any threatened, pending, or current litigation against the business?
Intellectual property How well protected is the business’ intellectual property, if any? (Consider copyrights, trademarks, etc.)
Intellectual property conveyance How much of the company’s intellectual property, if any, conveys with the purchase?
Material agreements Have all material agreements and related documentation been assembled and reviewed? (Contracts, employee agreements, shareholder agreements, etc.)
Lease assignment Are all desired leases, if any, assumable or have they been renegotiated for continued operations post purchase? (Consider land, buildings, office space, retail space, equipment, etc.)
Client contracts What level of existing client contracts, if any, transfer with the purchase of the business?
Supplier contracts What level of existing supplier agreements, if any, transfer with the purchase of the business?
Regulatory due diligence How well are regulatory compliances documented and disclosed? (Consider OSHA, EPA, required permits, levels of compliance, etc.)
Regulations How heavily regulated is the business? (Consider employment, safety, transportation, environmental, hazardous waste, etc.)
Regulatory compliance To what extent is the business in regulatory compliance?
Permits Does the business have all of its required operating permits?
Relations with authorities How good are the business’ historical relations with regulatory agencies?
Environmental due diligence How well are environmental issues managed by the business? (Consider emissions, hazardous waste handling and disposal, drainage, run-off, internal air quality, etc.)
Emissions Are the emissions, if any, from business operations within EPA standards?
Hazardous waste What is the level of hazardous waste, if any, generated by business operations? (Consider chemical, bio-medical, etc. but also motor oil, tires, cooking oil, etc.)
Hazardous waste disposal Is hazardous waste disposal, if any, conducted according to EPA regulations?
Drainage and run-off Is there potentially hazardous or damaging drainage or run-off generated by the business?
Internal air quality How good is the air quality inside business facilities?
Insurance due diligence How well are required insurance policies documented and disclosed?
Insurance Does the business have the necessary insurance for the type of business? (Consider business liability, property, product liability, errors and omissions, business income, automobile, worker’s compensation, etc.)
Insurance coverage How adequate is the coverage amounts for the type and size of business?
Insurance policies Are all insurance policies documented and in full force?


This site is intended as an informational tool only and should be used in consultation with appropriate professional advisors.



 

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