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Buying a Business and Verifying the Results

Buyers of small businesses often have the trouble of actually verifying the financial information that has been presented to them. The difficulty stems from the fact that many small businesses are not as organized from an accounting perspective as larger corporations are. Also, small businesses often report earnings for tax minimization purposes so it is in their best interests to minimize reported income. For these, and many other, reasons it can be a challenging to buy a business for sale and know exactly what you are going for. If you are interested in purchasing a business in Canada, there are steps you can take to get a clearer picture of the results.

Financial statements
Ensure that you, or ideally your accountant, review any financial statements for the business. The statements should be prepared by an accountant. Sometimes for a small business, the statements are simply put together by the owner so these would require even greater scrutiny.

Tax information
Review any and all tax statements and returns that the business has. Examine corporate income tax returns, GST and PST filings (HST is coming to Canada in 2010 so this will be different)

Bank statements
Closely look at the bank statements. Make special note of large sums of money going in or out. You want to see a normal patter of bank activity for the business. They key is to look for any red flags that sometimes do occur when a business is for sale.

Business Inventory
Review the levels of inventory in the business and see if there are any swings that do not coincide with the level of revenue being stated. If inventory and cost of sales activity seems low for the level of sales reported then ask the question and consult with your accountant.

Expenses on the books
Sometimes a business owner may take some business expenses ‘off the books’ in order for the results to look better. Sometime staff or supplies may be paid in ‘cash’ if it is such a business. Take a reality check of the operating expenses and determine if it is a realistic level for the type of venture being operated.

Mystery shop the business
If the business for sale is one open to the public, such as a retail store, spend some time mystery shopping it anonymously. Go in at different times and at different days to examine customer traffic levels. You will also see the number of staff working to give you a sense of employee costs.

These points above are only a few of the issues you should examine when buying a business. Consult with your professional advisors to help you with the due diligence process. A business broker can also give you some insight into how to go about purchasing a company and what to look for.

Choose the Business That You Want

Starting up a small business can be very challenging. But for those who don’t have a career or for individuals who want to become their own boss, it is an exciting opportunity. A good plan is needed if you want to ensure success.

First, you must identify the perfect business opportunity. The business environment is quite strained and finding a good opportunity may be difficult. Even if you find one, it will take a lot of courage on your part to pursue such a business opportunity. However, if you’re determined to make changes, starting your own small business is the best answer.

Starting out from scratch can be very costly. For instance, if you’re planning to hire some employees and have an office space, it is a huge investment. If you can’t afford a large business, you can tie up with an existing business. By choosing this alternative, you should conduct your own research.

It will involve studying the trends in the business industry. You should analyze the demand for certain products, it’s income potential and the work involved in running the business. Getting to know the company is also another concern that you should attend to. There are many business opportunities online that allow you to connect with established companies. Have you heard about affiliate marketing and MLM? Check them out if you want to work from home.

You must be motivated, hardworking, and ready to face challenges. It’s natural to have questions when you’re just about to start a business. Always think positive and make use of all the help you can get.

Look up to those individuals who were successful in starting up their own businesses. Through careful planning, you too can achieve success. Here are helpful tips for you to follow:

1. Choose the business that you want to undertake. In the process, you should ask these questions: is there a potential market for the business? Can you make a profit from it? Is the competition intense in that particular marketplace?
2. Again, as mentioned earlier, research is vital. If you want to avoid making costly mistakes, you must determine if your business can fill a certain place or niche. What kind of products or service are you going to offer? Is your business idea practical or not? Can your business create a demand in the market?

After carefully considering some factors, you can now assess if your business is going to be feasible. If it is, you should answer the following questions:

1. What skills does your business require? Do you have enough experience?
2. What is your business legal structure?
3. Will you need financing? What kind?
4. Where is the location of your business?

For those who want to start up a small home-based business, there are also important things to consider. Do you have enough home space? Can you run your business successfully at home? Can you handle all the business affairs on your own? You must be self motivated if you want to enter in a home-based business.

Now, its time to create your business plan. If you live in the US, you can consult SBA (Small Business Association). The organization can help you in planning a small business and in financing it as well. If you find it hard to manage the business, the organization can also provide helpful resources. SBA provides several services such as free business courses online. If you sign up for the courses, you will learn how to write business plans and how to raise the needed capital.

Check out the SCORE program by SBA. This business course is free and you can also find informative sections on state and federal agencies. You can also find links that you can use for your business. You can visit the official website of SBA in your city or town or you can call this number 1-800-827-5722.

Many people dream of starting their own small business but very few are able to achieve it. Always keep in mind that careful planning and intensive research is required. If you can do this right you’re on your way to success. This is the best time to start a small business.

How to Start a Successful Business 1, 2, 3 – Part 1 of 6

There probably isn’t a day that goes by, that someone doesn’t ask me how to start a new business or a freelance career. While it may come easy to many of us right-brained creative types, who have jumped in feet first into the void, it can be very intimidating and overwhelming to others. As a result, I have created a 6-part article series that will showcase three (3) important tasks and ideas per article, for your review. This is the first article of the six.

My first bit of advice to anyone starting out is this; try not to let all the steps and hurdles overwhelm you. The best thing to do is to take baby steps. Create and view a checklist and calmly take each step as it comes. It will help you stay organized and sane! This is not to say you shouldn’t learn all you can about starting a business. It is, in fact, a big step in a person’s life. However, if you overthink everything too much, it can become detrimental and may cause you to hesitate or recoil back from your goals. Everything in life carries risk, but don’t let fears of risk stop you from succeeding.

With that said… are you ready to take that entrepreneurial challenge and leap? Great! Let’s get started:

Create a Business Plan: Many people cringe at this idea, but it’s not to be feared. It is a good idea to create a business plan for a number of reasons. First, let’s clarify what a business plan really is: Ultimately, it is a very lengthy sales pitch that makes your company look good. But intrinsically, it is much more than that. It is also a fantastic way to set business goals, missions and objectives for yourself and your business. Is it life-or-death if you don’t create a business plan? Of course not. Just ask Bill Gates, who along with many other successful entrepreneurs, flew by the seat of their pants, in more innocent and forgiving times. Little did he most likely know, he would go on to become one of the richest men in the world. I don’t think the lack of a business plan stopped him in any way.

So then, why do you need a business plan? Because it’s a great way for you to stay on straight and narrow path. Do it for yourself and for your partners, if you have them. It helps keep everything and everyone organized and focused. It can also ease legal issues or business troubles, should they arise later on.

There are countless business plan template software, as well as online templates, which can assist you in writing a business plan. One very helpful piece of business software, in my opinion, is QuickBooks, which is very easy to use. Select versions of QuickBooks, such as QuickBooks Pro or Premier, have a business plan template built into the system, which works really well. If QuickBooks isn’t your thing, Microsoft also offers an online business plan system that has received favorable reviews. You can also go online and search for business plan templates and software that suite your exact needs.

Conduct Market Research & Study the Competition: This is not as hard as many people think, nor it doesn’t have to be expensive. Investing a little bit of time and elbow grease into market research can give you a clear picture of what is going on in your potential industry. Gathering information about the economic trends in your marketplace is very important to keep you ahead of the game.

Don’t have a lot of money to shell out? No problem. Just do the groundwork yourself. You don’t have to be a rocket scientist or have gazillions of dollars in the bank to do this. Simply begin viewing competitor websites, and really study what they are doing. Try to view white papers, business plans, sales material, or any information they have posted on their site. If they have an Investors Center, look for financial information, which is open to the public. It’s not hard and your only cost is some time invested.

One marketing surveillance technique is to create questionnaires and send it to prospective customers or community members, within your target market. This can be very effective because the more you know about them, the better service you can provide to them. It’s also very inexpensive – even free of charge, in many cases. You can do this via the Internet, e-mail and even postal mail still works, depending on the nature of your business. Online surveying is most desired because it’s easy, accurate and costs are negligible.

You can even set up a social network page, blog or online chat venue to begin conducting your own online focus group interviews! If you can, offer participants some kind of reward for their time, such as discount coupons to an event, a free coffee at Starbucks, or something easy and inexpensive that says “thank you for participating.”

Inexpensive Ways to Market and Promote Your Business: You’re probably not a huge corporation, so you most likely need to watch your spending! With today’s business tools, marketing and promotion does not have to be expensive these days. What it does have to be is consistent. When you need to “promote on a dime,” it can be challenging. However, it also stirs up the creative juices and get’s the brain flowing with ideas. Don’t let finances be a reason not to talk to people about what you do. Having money doesn’t sell people, people sell people. Ever heard of the famous automotive product, ArmorAll? It was started in an apartment bathtub! The creator had very little money to create his product or run his business. But, what he did have was a great product, a vision and the drive to see it through. Today, that empire is worth billions.

You know about the Internet, social networking and the power of blogging. But, are you actually doing these things? Social networking and blogging are free of charge and you can’t get any cheaper than FREE! Once you truly commit to using these tools, they will change your life, especially in business. So, toss your fears aside and dive into the online social scene to help promote your business. It’s one of the most important steps you can take and you’ll be very glad you did.

I hope you found this article helpful. We will be covering the importance of creating a business website, later on in Part 3 of my article series.