If you’re thinking of buying a business, then good for you! This is a very exciting time filled with a great deal of possibilities. You could be embarking on a path that will secure the financial safety of yourself and your family for many generations to come. It is, however, a risk. You need to do a great deal of research and preparation to make sure that you are investing your time and money wisely.

When you are buying a business, a checklist is important to make sure that you are performing all the necessary tasks. You should ensure that you have done your due diligence on every aspect of the business that you are considering buying. Below are ten key steps in your buying a business checklist:

1. Get every aspect of the business detailed in writing

You need to know what you are buying. All of the liabilities, assets, ongoing claims, and more. You should also have clear visibility on the contracts that are currently in play. This can prevent any nasty surprises down the road when it comes to amounts owed to suppliers, and amounts owed by customers. You should also have the inventory, fixtures, equipment, signs, and anything else that belongs to the business written down in advance of purchase.

2. All financial statements need to be audited

You can have a CPA audit the business to make sure that everything is above board. This is a cost you may need to take on yourself but it will be worth it for the peace of mind alone. This will allow you to be sure that the numbers that you have seen are accurate and that your decision to move forward with the purchase of the business is a wise one.

3. Check industry benchmarks

So you know that the business is doing well, what you don’t know is how well they should be doing. This is the part of the buying a business checklist where you need to do your research. You need to find out all that you can about the competitive landscape to ensure that the business that you are planning to purchase is holding it’s own with the competition.

4. A good target for ROI is 5% annually

Setting a good target should be part of your buying a business checklist. You should always circle back to this number when reviewing the financials, potential profits, and salary. Then you should compare that number to the selling price of the business. You need to make sure that the value of the business is being accurately represented.

5. You need to contact you bank

There are many moving pieces when it comes to purchasing a business. You need to make sure that you have done all that you can to establish a relationship with your bank and that you are aware of all of the documents that you need to present to them on a timely basis to prevent any delays in your purchase agreement going through.

6. You need a lawyer

Not just any lawyer, but you need one that has many years of experience in handling the purchase of existing businesses. If your current lawyer does not have a great deal of experience in this area of law, then you should find a knowledgeable business lawyer with industry experntise. This will probably be the largest financial decision that you make and you need it to be executed flawlessly by someone who is at the very top of their field.

7. Answer one very important question, why are they selling?

This is something that you need to get to the bottom of. If the business is doing great and making lots of money then the question needs to be asked. You should make sure that you are fully satisfied with this answer and that the numbers all back up what you are being told. You don’t want to find out down the line that there was something about the industry or business that you didn’t know ahead of time.

8. Forecast the next few years

Are you going to see a return on your investment? You should have a clear understanding of how long you expect this business to remain operational. Are there any internal or external factors that could cause the business to fail? If so what can you do to prevent them and how great a risk are they.

9. Does the business own the building?

If not, then you need to make sure that there will not be any changes to the lease agreement. When a business changes hands you may find that this is a good time to discuss a renewal agreement. You may also want to make sure that you understand the conditions for termination of the lease so that if you want to change locations you are able to.

10. Are they willing to sign a non-compete?

This can be a tricky subject, but if you are concerned that the seller will take all of the business’ clients with him, then you need to get it in writing that he will not compete with your business for a set period of time.