Starting a business and selling a business. Learning the ropes. How to do it the right way
 

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Buying & Selling a Business

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.   Top
Free:
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Free business for sale listing exchange that provides a confidential forum to facilitate the buying and selling of businesses with thousands of businesses for sale, classifieds, and franchise opportunities as well as comprehensive business information for business buyers and business sellers. Buy a business, sell a business, or find a business broker.

Business Start Up

 
Business Start Up Considerations A list of questions to be answered before you jump into a new business venture  Top
Recommended reading Best sellers list guides to save time and save money when starting a new business
Entity Choices Information about
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 insurance.

b.  keeping costs to a minimum.

c.  Learn about Pros & Cons of Each entity type- LLC, S Corporation,  C corporation,  Sole Proprietorship,  Partnership

d.  What are the taxation considerations  

e.  Incorporate out of state?

f.  Establishing the entity without an attorney? Here are 2 sites  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     . Top

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. Top

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Sample chart of accounts For use in setting up QuickBooks
Get the facts on starting a business Law Business center, articles on starting a business, entity type, Web business, marketing.      Top

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 by 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 business cycle.
Background for the home Biz Articles for the new small business, plenty about home based businesses  Top
Marketing Marketing and your new business    Top
EIN 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      866-816-2065) Top
Small Business administration Great articles for business owners. Info on starting a business, financing a business, managing a business, plus special opportunities for sm biz. Top
Free Business Plan Check your local universities.  Fairleigh Dickinson University  barrood@fdu.edu 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 find funding!  Top
Domain Names 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.
At Whois.sc  you may check availability of a name.  When you find a name  secure it immediately through registration at  register.com  (one of many services). 
 Top
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 planning

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