Business Buying Basics

Looking for a new challenge?  Already own a business, but looking to expand?  A quick way to become a business owner or to expand is by purchasing an existing business.  

Previously we discussed Starbucks’ purchase of Bay Bread because Starbucks wanted to expand the variety of foods served in their coffee shops.   Many details of the deal are secret, but we can be fairly certain Starbucks’ corporate officers didn’t choose Bay Bread on a whim. They probably spent many months investigating all aspects of Bay Bread’s business.

Some factors that weigh in on the decision whether to buy a particular business are obvious.  You probably would not want to purchase a business laden with excessive debt.  Nor would you want to purchase a business with little or no track record. To avoid starting off on the wrong foot, or causing unnecessary damage to your existing business, get the answers to the following questions[1] before you extend an offer to purchase a business:

  1. Location — find out not only where the business is located, but whether the business is tied to that location by its nature or is it portable?
  2. Track record — request copies of tax returns, audited financial statements, and monthly profit and loss statements for at least three years, if applicable, to discover the financial health and viability of the business.  Be prepared to sign a confidentiality agreement. (You would want one, too, if you were providing such information.)
  3. Management — who are the current managers, what are they doing right (and wrong), and who will manage the business if you buy it?

 The answers to these questions will help you decide whether to investigate further. 

There are many other questions to ask before buying a business. For more information about acquiring an existing business, or for help with other matters related to your business, the attorneys at the Scolieri-Beam Law Group, P.C. can help.  Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can take care of the details for you, including buy/sell agreements.  Contact us today at (412) 765-0546 or via email at info@scolierilaw.com.


[1] Adapted from an article in Entrepreneur by Ed Pendarvis.   http://www.entrepreneur.com/article/196550