Buying a Retail Business

How can I determine that the sales of a retail locksmith business are what the seller of the business claims them to be? Naturally, I am interested in the accuracy of the gross and net profits before making a decision to buy.

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Reply to
mel
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Hmmm, a really good question.

Get him to show you three things.

  1. his books for last three years, including copies of invoices which you can then match up with......
  2. bank statements, since good business practice is to deposit all receipts into the bank.
  3. Tax returns, both federal and state, for last three years. Now then. Suppose he says to you something like "The figures on the tax returns aren't the total gross receipts; after all, nobody reports....... !) Run; don't walk, away.

ChEAr$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

I wouldn't run away at this point. I'd just insist on negotiating any purchase price based on the data reported on the tax return. After all, you know he's hiding income (which you will value at $0), but it's less likely that he's inflating expenses without receipts. Of course, it's less likely that you'll be able to negotiate a price that's acceptable to the seller since you won't be paying anything for the unreported earnings. Ira Smilovitz

Reply to
Ira Smilovitz

I guess my real point is this: If he'll lie to the government, he'll not hesitate to lie to anybody, prospective purchaser especially. ChEAr$, Harlan Lunsford, EA n LA Sun Jun 4, 2006

Reply to
Harlan Lunsford

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