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Fredy Namdin
  • Total posts: 45

Hi Ivan,

Just my 2c.

Due diligence is a must, always insist on looking at Financial Report from the business’ accountant (the one they use for tax purposes). Sometimes with new franchise they will try to show you ‘typical’ results/sales, please be careful, regardless of what they say, franchises are also businesses that are subject to many variables, there is no ‘typical’ results.

If possible try to get an idea of the business model. Basically you want to know their position in terms of cash flow, profit margin, and market. Ensuring that these three are in healthy position is a good start.

Watch out for big expenses such as: rent, wages, and equipments. These can eat into your initial capital very quickly.

Study the industry that the business is in. Is the industry expanding or contracting. How many players are in the industry? Can you get the slice of the pie easily? Remember, in its essence, business is about moving customers from your competitors to you, and keeping them there.

Finally, figure out the reasons of the business sale. Are you ok with these reasons? Many businesses are selling because it is too difficult to make decent profit due to increased competitions. Some other because the owners are retiring. Some because they depend on few major customers and these customers are pulling out. Etc.

All the best and hope it helps!