What to consider when evaluating a business for sale

Potential owners must look at many different factors when choosing to buy a business. Any purchase should meet the owner's goals for the future and provide value over time. Find out what factor to consider when buying a business.

Franchise businesses have the backing of a parent company that sets standards, provides support and offers training. The parent company stipulates rules and regulations to make sure all franchisees comply with local and national laws. However, franchise owners don't completely control their businesses and must pay the parent company a percentage of the revenue.

Independent businesses have no additional fees. These businesses offer more independence and opportunity, and allow owners to create innovative business strategies. Although the owner has complete control of the business, he or she accepts more risk and responsibility.

Physical location. Before you decide to purchase a business, consider the physical location, condition of the working space and the equipment you'll need to run the company. The cost to update, repair and maintain the structural aspects of the business must also be reviewed.

Customers, bank and vendors. Consider the company's reputation and the strength of its relationships with its current customer base, financial institutions, and vendors and suppliers. If the business is not known for being productive, honest or transparent, think about what will be required to change perceptions, and consider if the cost and effort needed to change the company's reputation will bear any fruit over the long term.

Value and revenue. If the business isn't currently turning a profit, find out why. Possible causes could be a bad reputation, too much competition, poor management or lack of proper infrastructure. Before purchasing the business, determine what you would need to do to improve value and profits.

• Make sure the purchase price doesn't jeopardize your personal financial situation. If you qualify for a large business loan, there's no requirement that you must accept the full amount. You can get a loan for less than the total approved amount.
• Think about your expertise, experience and knowledge when choosing a business. If you plan to take an active role in running the company, you'll benefit by having previous experience in the industry.
• Consider your long-term plans for the business. If you plan to sell it in a few years, you may not net a profit in that amount of time, particularly if you'll need to work hard to make the company viable.

Finding and evaluating a business for sale is no small matter. Careful consideration must be given to each prospect to make sure the purchase is worth the cost, the time and the effort it takes to maintain and grow a business.