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Check biz before buying
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March 7, 2000: 12:30 p.m. ET
Do your homework before laying out money to acquire a small company
By Jane Applegate
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NEW YORK (CNNfn) - Dear Jane: What should I do to check out a small business I'm thinking about buying?
Buying an existing business has great benefits because it's up and running with customers, but it can also be riddled with serious problems.
There are many aspects to review carefully before you make a serious offer. You will probably need to retain more than one adviser to help you sort through them.
Here's a list to get you started:
- Retain an experienced accountant to review the financial records.
- Ask your attorney to review all the company's corporate records, employment policies, insurance claims and other important materials. If you don't want to do it yourself, hire an attorney's service to check the state, federal and local court records.
- Ask the owner for a current list of vendors and suppliers. Contact them to find out what kind of reputation the business owner has in dealing with outside companies.
- Try to speak with the company's banker if you plan to assume any outstanding business loans. Order a detailed credit check.
- Speak with as many employees as possible in a private, confidential setting.
- Structure the purchase agreement carefully. Make sure it has a bailout clause.
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ApplegateWay
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