Things you need to ask for, review and questions to ask yourself and the prospective seller:
1) Current Balance sheet.
2) Balance sheet last three years.
3) Cash flow statement by month.
4) Profit and loss, monthly comparable
5) Last years taxes, year before that
Condition of Equipment/Inventory.
6) Commitment of staff/chef/personnel.
7) If a restaurant, pay attention to food cost/vendors/vendor agreements/contracts.
8) Equipment leasing agreements/cost.
9) Accounts receivable, if any, aging.
10) Accounts payable, aging.
11) Make a list of all equipment, age, est. value.
12) Lease agreement.
13) Insurance costs.
14) Special permits required, annually, etc.
15) When taxes get paid, anything in arrears?
16) Copies of all contracts, written agreements.
17) Does a written business plan exist? Marketing plan?
18) How is the business currently being marketed? Advertising budget?
19) Is the building up to all codes?
20) How many parking places are available if retail type location?
21) How easy is egress?
22) How visible is the location to passing potential customers?
23) What is the draw to the area? or strip center? Who are the neighbors? Do they add to your image or detract from it?
24) Why is the owner selling? Do you believe the reason? If not, why?
25) How much time will you have to devote each day, each week to run manage and operate this business?
26) What are your expectations for salary?
27) What are the four or five things that have stopped this business from reaching its full potential in your opinion?
28) What are the zip codes within a 10 to 15 miles radius of this location and the number of households? Demographics? Of this group who are your customers? How many?
29) What is the perceived reputation of this business in the eyes of current and past customers?
30) What hands on research have you done to get a feel for this business as it exists today?
31) How many years of experience do you have in this field? Have you ever owned and run a small business before?
32) Have you ever hired and fired personnel? Provide reviews for improvement and wage increases?
33) How astute are you at Marketing? Financial management? Operations? Buying merchandise, if that’s required? Vendor negotiations?
34) Are your prepared to pay 3 to 5 times earnings for this business? If a business price is 250,000, the business has to be netting around $75,000 a year.
35) If 100% financed by a bank, what are the loan requirements? How much money do you have for the down payment (generally 20%)
36) Will you have enough working capital to make changes and see you through the rough spots the first year?
37) What kind of bank terms do you need to be comfortable with the monthly loan payment?
38) What’s your FICA score? (Less than 700, you may have problems securing a loan.
39) Will you have a complete business plan in place before approaching a bank for a loan?
40) Do you have an accountant (CPA) and lawyer on board for your business?
41) Will you have partners in this business? What kind of written agreement will be developed? Who will be president? Make decisions. Who will get the partners share in case of death?
42) Write down, five things you can do over the first 30 to 60 days of taking on this business to generate more revenue and save costs. The 60 to 90 days following that. If you can’t come up with anything, either this business is a gold mine or you need to think about purchasing something else.