Adult IQ — Buying a Business

Evaluate the Opportunity • Understand the Numbers • Reduce Costly Mistakes

Buying an existing business can be an exciting opportunity. Instead of starting from nothing, you may be stepping into an established business with existing customers, employees, equipment, suppliers, systems and a history of revenue.

But an existing business can also come with problems that aren't obvious at first.

Before you agree to buy anything, it's important to understand what you're actually purchasing, how the business makes money, what its financial position looks like and whether there are risks or obligations that could become your responsibility after the sale.

The Adult IQ Buying a Business Handbook was created to help prospective buyers understand the things they should be thinking about before committing to a business purchase.

This handbook takes a practical look at the process, from finding and evaluating an opportunity to reviewing financial information, asking questions, investigating the business, understanding the asking price, negotiating terms and preparing for the transition into ownership.

What You'll Learn

Inside, you'll learn practical ways to:

• Look at potential business opportunities more carefully

• Understand exactly what you're buying

• Review revenue, expenses, profits and cash flow

• Ask important questions of the current owner

• Understand the business's customers and suppliers

• Look at employees, systems and day-to-day operations

• Understand why due diligence is so important

• Investigate debts, liabilities and existing obligations

• Review contracts and other commitments

• Assess equipment, inventory, property and other business assets

• Consider the business's position within its market

• Research competitors and potential challenges

• Look at whether the asking price appears reasonable based on the information available

• Understand some common purchase and financing arrangements

• Prepare for negotiations with the seller

• Recognize warning signs that may require further investigation

• Think about what needs to happen after the purchase

• Develop a practical transition plan for taking over the business

Don't Just Look at What You're Buying—Look at What Comes With It

It's easy to get excited when you see a business that appears to be successful.

Maybe the revenue looks good. Maybe the business has a strong customer base. Maybe the owner says it's a great opportunity.

But before making a major commitment, you need to look beyond the sales pitch.

You want to understand the numbers, the customers, the expenses, the contracts, the employees, the assets, the liabilities and the day-to-day operation of the business.

A business can look attractive on the surface and still have issues that aren't immediately obvious.

That's why due diligence matters.

The more questions you ask and the more information you review before buying, the better prepared you are to understand what you're actually getting into.

Adult IQ Buying a Business isn't about telling you which business to buy. It's about helping you understand the questions that should be asked and the information that should be investigated before you make a major financial commitment.

The goal is to help you approach a potential purchase with more preparation, awareness and financial discipline, while recognizing when you need help from professionals who can properly evaluate the legal, financial and tax aspects of the transaction.

A business purchase can be a major investment. Take the time to understand what you're buying before you sign on the dotted line.

Disclaimer: This handbook provides general educational information and is not legal, tax, financial or business acquisition advice. Business purchases involve significant risks and should be independently reviewed by qualified legal, accounting and financial professionals before completing a transaction.