As my title says, I am planning to buy an online business my friend owns. He says he does a profit of about 2000-3000$/month, how do i go about checking the validity of his claims. I am planning to check his online transactions, bank statement and his tax returns. Would this suffice or Should I be checking other things?
For starters thats good. Next I would ask him who his suppliers are and then confirm them. Also make sure you legally document this purchase and specifically spell out what you are buying.
Proof of revenue is a must. Do not just take his word for it, you need to see detailed financial reports, or at least a proof of the revenue in visible form.
Consider the customer base and how it has improved/decreased over the period of him operating the business. Is the business expanding or declining? Which ever it is, have you factored that into your purchase price?
If you do not know how to read the companies financial statement's since it has been in operation pay a accountant to check them over and explain them to you, If you do not have a accountant ask family and friends to reccomend someone they trust to you, A good smart accountant is as good for your business as any good supplier, Goodluck
Buying an Online Business what to Check for
David
Linear Mode
November 2009
