Do your homework
A few good tips when buying a business:
Also, call every supplier or customer of the
company and ask if they really do business with the company.
Obtain the last three to five years of
the financial statements these are easier to interpret than the tax
returns. In addition, get the last three years of the
tax returns. The tax returns show the income reported to banks and
the government and can be confirmed by obtaining a copy from the
IRS, while the financials could be trumped up by using a different
method of accounting or erroneous information. It makes sense,
before closing, to request confirmation of the tax returns from the
IRS using form 4506 (takes 60 days and $23) or you can request a
computer transcript (for form 1040 series only) of the information
that was listed on the tax return (takes 10 days - use form 4506).
Keep in mind that the tax returns are generally optimized to keep
the income as low as possible and may use accelerated methods
of writing off assets which still have significant value to the
business. Be alerted to a large increases in revenues or
reduced expenses on the most recent tax returns and the current year
financials This change may be short term or inflated.
Often the seller has planned to sell and will pay the tax in
the last few years of business because the revenue from the sale
will recover the tax paid plus much more . So spend a day or
two at the business and count the revenue and extrapolate into an
annual figure. It is not always possible, but negotiate a payoff
that will reduce the sales price if specific sales and expense goals
are not met. And be wary of hiring the prior owner as an
employee, they are used to dipping their fingers into the cash till.
Free articles to get you thinking
Do your want to buy or sell business? Do you want to
determine the fair market value of your business? This website
offers free subscription to many articles on the topic plus
resources of brokers, businesses for sale, and valuation software.
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Business Start Up Considerations
A list of questions to be answered before you jump
into a new business venture
Best sellers list guides to save time and save
money when starting a new business
a. Liability and the risks and the costs of protection
against legal claims. Incorporation provides liability
protection at a cost including incorporation, legal and
accounting fees and annual filing fees to the state and local
government, not to mention the cost of tax preparation and
b. keeping costs to a minimum.
c. Learn about Pros & Cons of Each entity
type- LLC, S Corporation, C corporation, Sole
d. What are the taxation considerations
Incorporate out of state?
f. Establishing the entity without an attorney? Here are 2
site A or
site B that list the websites for setting up a
Corporation or LLC in all 50 states and here are the
phone numbers to contact Secretary of
States should you have a question .
Accrual or Cash
Use accrual reports in your daily operations of
the business and use the cash basis reports to generate
business tax returns ....... but be sure you fall within the
guidelines..... read more.
Save over 33%
$71.95 for 250
$89.95 for 500
$119.95 for 1000
Sample chart of accounts
For use in setting up QuickBooks
facts on starting a business
Business center, articles on starting a business, entity type, Web
Common Mistakes new businesses make
- Inadequate start-up capital. The
uncertainty of how a new business will grow makes any forecast
fraught with error. Therefore, in the beginning hang onto your
cash, rent, lease, don't buy. Watch each penny and weigh every
purchase decision. Stick with the basics and save the frill
purchases for later. For example, outfit the office with second
hand telephone equipment and furniture.
- Wrong choice of business. Failure to do the
necessary market research could
set you up with a business that has too much competition, or new
technology emerges that will make your product or service
obsolete. Or starting a business in an industry for which the
owner has no experience.
- No partnership agreement. Expectations,
goals, remunerations should be exhaustively discussed and put to
paper before beginning business. Purchase
The Partnership Book
Attorneys Ralph Warner & Denis Clifford which comes with
the tools and discussion topics needed to keep the 'emotional'
side of the discussions at bay.
- Lack of planning. Without a mission, goals
and strategies, business tend to stagnate. Part of planning
includes evaluating how the business is doing and determining
where it is headed and what resources are needed to there.
Extending credit to customers who are high credit risks. Invest in
a credit service who will provide reports on the credit worthiness
of customers; request updated financial statements from credit
customers annually; begin follow-up on unpaid accounts receivable
on the day the invoice is due; stop shipment of new product until
past due balance is paid.
- Failure to implement a bookkeeping system
that will provide detailed information on costs of goods sold,
where customers are coming from, results of marketing strategies,
comparative sales data, profitability by customer. Without these
management tools business owners cannot decipher between a good
and bad business decision.
- Keeping customers who do not contribute to
the bottom line. Time is money, sort your customer list and
drop the bottom 10% of customers who are not reaching
profitability goals. Spend the extra time and resources on finding
customers who fit your ideal customer model.
- Failure to gain the marketing and
salesmanship knowledge needed and put forth the effort needed to
attract customers. Without customers there is no business.
- Advertising - Make sure every ad clearly
states what you are selling, why someone should buy it, .. NOW.. ,
why they should buy it from you.
- Living beyond your means. Before
distributing profits in the form of salary and dividends,
put aside working capital for tough times. Take 10% of earnings
and put aside for when there is a downturn in the business cycle.
Don't take more salary than the business can afford to pay.
Most businesses take 4-5 years to establish themselves and become
successful. Be sure you adjust your spending habits for the
duration of this start-up period.
- Using payroll taxes and credit cards to
finance your business. The financing costs of these
procedures will put you out of business. The taxman gets paid
first, before creditors and establish a line of credit with a bank
during good times which can be utilized during the downside of the
for the home Biz
Articles for the new small business, plenty about
home based businesses
Marketing and your new business
online application or telephone
New businesses generally will
required a federal ID (EIN) number. After setting up a
new entity with your State, acquiring an EIN is the next step.
(Telephone- Employer Identification Numbers
Great articles for business
owners. Info on starting a business, financing a business, managing
a business, plus special opportunities for sm biz.
Free Business Plan
Check your local universities.
Fairleigh Dickinson University
runs a program
that matches up the (MBA) business graduate students and small
business. Put all that brain power to work for you for an
entire semester. Not every business will be selected. The
owner must be available at the beginning and end of the semester to
meet with the students, facility and program director. But, think of
how wonderful it would be to get input on your mission statement,
strategy and goal development, along with the projections needed to
Is your new business name available as a web
domain name? Secure the name now, even if your web presence is a
few years away. The cost is minimal from $20 to $35 per year.
you may check availability of a name. When you find a name
secure it immediately through registration at
of many services).
|Small Business Plan resources
American Express has several very good articles
Bplans.com has sample business plans to model yours after
sbishere.com provides sound advise for business startups and
more sample business plans
Small Business Plan Guide - many resources for business