November 10, 2008
if you do a due dilligence on a business and it checks out positive you do good at running the place will you?
Can you answer mark s's question about Checks?:
most likley do well at generating a proffit?
Filed under More Checks Answers by admin
Comments on if you do a due dilligence on a business and it checks out positive you do good at running the place will you? »
50/50 chance yes.
u become the variable.
Due dilligence is only as good as those that do it.
We bought a business presented as profitable and huge, it ended up actually being on the verge of bankruptcy with sales less than 25% of reported. AND the idiot hadn't paid his sales & withholding taxes for nearly a year. OUCH.
5 years later and we still are barely getting by. Not to mention the unreported downturn in the economy.
So, you really need to look at your "due dilligence", we paid $45,000 for ours and they missed all the signs!!!!
Anyway, no, doing your due dilligence and being "good" at running the place does not automatically mean you will generate a profit.
Keep these things in mind:
Nearly 50% of all small businesses fail within the first 2 years, 70% within 5. (from the SBA's website).
Owners of truly profitable businesses usually don't sell them (unless real weird circumstances happen).
The current owner is turning his profits WITHOUT having to make the payments you are trying to make on the money borrowed to buy the business.
People lie. Failure brings out the worst in most people.
It always costs twice as much money as you think it will and takes 3 times as long.
You might not get the same deals from your vendors that the previous owner gets.
Your customers may not like the change and vacate.
Millions of things can, and do, happen. You need to go and find a mentor (not the current owner) who has a business to help you through this.
I read in your other question that you are only 18, have you secured bank financing yet? Do you know what your payments are going to be? Have you figured your break even point with the payments? Do you have accounting & tax knowledge? How much of a rainy day fund will you have after you buy the business?
As I have no idea what this business is, or any background, I really can't give you accurate advice.
And I don't want to discourage you, but you are getting ready to make a decision that could put you in a hole or make your future. Take this very seriously.