Buying a business can sometimes be an easier way to get into business than starting one from
scratch. The main advantage to buying a business is that historical financial information is
generally available – an important part of the analysis process for not only the potential
business owner but for the funding source (banker) as well.
Buying a business necessitates doing a great deal of research and analysis to ensure that the
aspects that made the business thrive in the past are still viable for the future.
Be sure to get complete and detailed financial data on the business to be acquired. If you
cannot obtain the data, or if the current owner is not willing to share the data, that could be
a red flag and caution should be exercised.
Issues such as business valuation, non-compete agreements, the purchase agreement negotiation
process, and tax issues all require a high degree of attention. Further, acquiring a business
does not automatically shield the potential owner from liabilities incurred by the outgoing
owner, so enlisting the services of a skilled and seasoned attorney as well as an accountant should be
strongly considered.
Even then, researching the business, analyzing the firm’s financial statements,
interviewing key employees and clients, and having a complete and thorough knowledge of every
aspect of the business is the only way to determine if you should proceed with the purchase
process.
For additional information or assistance, please email us at
cedsbsd@ky.gov or call 800-626-2250.
Additional Resources:
U.S. Small Business Administration information about buying a business:
http://www.sba.gov/smallbusinessplanner/start/buyabusiness/index.html
Nolo article on things you should know before you buy a business:
http://www.nolo.com/article.cfm/objectID/42CD1570-AC36-44DD-A6EB310F081BC349/111/254/AR
Nolo article on making sure the business you want to buy is a good investment
http://www.nolo.com/article.cfm/ObjectID/9EF63086-386D-41F8-B106E34BA6A48A10/catID/C1DBB6FC-F9C3-40CA-8A4D77366ED0D4D5/111/254/ART/