Evaluating the Business
The first thing a buyer will do is evaluate the business by its history. The buyer needs to understand certain key aspects of the business such as:
- The business’ method of acquiring and serving it’s customers
- How the sales, marketing and finances inter-relate
To do this the business’ financial statements, operating practices and other documents must be reviewed. These include:
- The balance sheets
- Income statements
- Sales journals
Other assessments based on various aspects of the business’ operations must also be made upon:
- Personnel: for example, what are the responsibilities, rates of pay etc of each employee?
- Marketing: for example, who is the geographic market area?
- Patents: a list of patents and copyrights should be reviewed in terms of when they expire.
- Taxes: for example, what was the outcome of the last tax return?
- Legal issues: for example, are all state registration requirements being met?
- Competitors: for example, what disadvantages/ advantages does the company have over its competitors?