"9-Keys" is an insightful series of "How To's" that addresses vital issues that any business owner can benefit from. They are:

• Seek the best people
• Train your staff to be more effective
• Improve your workers' effectiveness
• Effectively manage your time
• Assess the true value of a business
• Selling your business
• Buying a business
• Avoid bankruptcy
• Determine your break-even point, your point of diminishing return and manage for profit

The successful purchasing of a business is a difficult, complex undertaking even in the best of times. When acquiring a business, one is seeking sufficient income to justify the purchase price and the ability to ultimately sell the business for capital gain.

Everything that can stop the continuity of income, or reduce the value of the business when selling, needs to be carefully considered before a purchase agreement is signed. Often, sellers are unlikely to disclose potentially negative issues and many purchasers are either rushed into a transaction, or because of inexperience fail to raise some key questions. Buyers must spend more time conducting research on the business and verifying that it is in fact worth its sale price.

Buyers must also determine whether neighborhood population shifts, variations in the economy, or negative effects of the new management on the business will reduce sales. For these reasons, it is imperative that the buyer spend as much time as possible studying the core business, as well as legal and accounting considerations.

Be aware that sellers may not reveal that sales were acquired at the cost of low profit margins. The buyer must take the time and make the effort to seek out the not so apparent expenses and costs of the business. To confirm the data provided by the seller the buyer should conduct a trial run. Monitoring traffic, determining the average sale, checking with vendors to confirm wholesale costs and asking to see current payables are all the responsibilities of the cautious buyer.

The seller or the business may be in trouble. The seller may be in default with suppliers, credit agreements, commercial lease, or under investigation by tax authorities. The buyer who has invested the time to find the facts not readily revealed by the seller could then be in a position to negotiate a lower price or better terms

The buyer must be aware that the seller, having superior knowledge of the customer base, the neighborhood or the potential for increased competition, may be seeking to sell before these factors become apparent to prospective purchasers. The seller may know that the premises where the business is located has potential for disruption

or interference with its operations. For example, if underground storage tanks were located on the property and there was a petroleum leak - even years before - the local Environmental Protection Agency could conduct an investigation and, if necessary, close the business until a thorough clean-up can be completed. Or, if the premises do not comply with the Americans with Disabilities Act, construction alteration may be necessary, resulting in interruption at great expense.

The buyer must keep in mind that most likely, a seller who has built a thriving business with no current or imminent problems, would not sell unless the price is generous, or if there are in fact, some problems which are not obviously apparent.

The buyer must search for the real reason the seller is selling the business. What is the true motive? The successful buyer has patience and investigative diligence.

By Christopher John Gullotta, Attorney at Law

The information above is general in nature and does not constitute legal advice. Do not attempt to solve your individual and fact problems, based upon this general information.