New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
- advertisement -
Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance

 
Buying a business? Better do your homework
Page | 1 | 2 | 3 |

While you might see financials and glossy brochures, you also want to do your own legwork.

- advertisement -
Talk to customers, suppliers, current employees and former employees. Sellers should have no problem giving you names and phone numbers. (Be very wary if they don't.)

Then go out and find additional names that aren't on the lists.

Talk to anyone who has purchased the same opportunity. Would he or she do it again?

Is what you're learning on your own in synch with the information the seller is sharing?

Sussing out a good business opportunity
What is it you're really buying? A lot of scams and bogus opportunities make big promises but are sketchy on details. Get specific early. What is the product or service you'll be providing, who are the customers and why would they come to you? Even more important, exactly what will the seller be giving you for your money?

Scammers will count on the fact that no one wants to admit ignorance. If a seller glosses over details by saying something like, "But I'm sure I don't have to explain all this to you," look out, says Mark Weaver, director of the Entrepreneurship Institute at Louisiana State University. "You've just been conned."

With a genuine business, the seller should fill in all the blanks. The transaction should be totally transparent: You know exactly what you're buying upfront, and no topic is off-limits. "You've got to go through it all," he says. "You're talking about putting 50 to 60 hours a week into a business."

If your potential customers are businesses, talk to local professionals and find out where they currently get the supplies or services you intend to provide. What do they think of the company you're investigating? How do local or national trade organizations that serve that profession view the operation? How do the prices and products compare to the competition?

The No. 1 "factor in having a business is: Is there a customer?" says Jeffrey Fox, author of "How to Make Big Money in Your Own Small Business," and president of Fox & Co., a marketing consulting firm. 

While a potential business owner can, and should, analyze the financials, one real issue is what customers and potential customers think of the business. "You have to go out there and talk to existing customers," he says.

Try to experience the business like a customer, Fox says. Call the toll-free phone number. Go on the Web site. Try to buy the products. Go to a trade show exhibit. "Do it not with a jaundiced eye, but with an unclouded eye," he says.

Beware of business marketers who hawk any business as an easy-money proposition. They are "assuming all the buyers are the same," says Fox. The truth is, a genuine business won't be a perfect match for every potential buyer because it will require certain skills. Not everyone has the same skills.

Be very suspicious of any seller who uses high-pressure tactics (or even subtle manipulation) to imply that if you don't buy immediately you'll lose the opportunity, says Weaver. 

"Anybody who is putting that kind of pressure on you is trying to get you to make a decision without having the tools or information to make a good decision," he says.

 
 
Next: "... you have to ask a lot of questions."
Page | 1 | 2 | 3 |
 
 RESOURCES
Get our free consumer update each week
Entrepreneur quiz
Answer that entrepreneur itch
 TOP PERSONAL FINANCE STORIES
Video: 5 myths about going green
5 myths about going green
Video: Ways to keep produce fresh
 

Compare Rates
NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 4.45%
48 month new car loan 3.77%
1 yr CD 0.89%
Rates may include points
RELATED CALCULATORS
  How much life insurance do I need?  
  Calculate your payment on any loan  
  What will it take to save for a goal?  
VIEW ALL  
BASICS SERIES
Begin with personal finance fundamentals:
Auto Loans
Checking
Credit Cards
Debt Consolidation
Insurance
Investing
Home Equity
Mortgages
Student Loans
Taxes
Retirement
FINANCIAL LITERACY
Rev up your portfolio
with these tips and tricks.
- advertisement -
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.