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How do I know if the seller is being honest when buying a business?

I'm in the process of a business purchase, but up until now, a lot of the information I have received has been verbal and or based on paper work that any one can fake. What can I do to make sure I am getting honest information?

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Answers (3)
Steven St
World Business Partners, Inc
Los Angeles County, CA

There's a saying that goes "Trust but verify." That should be your motto when buying any business. Most Sellers are going to be for the most part honest, but remember they are trying to sell their business. There is a real reason why they are selling that you may or may not know. It may have to do with the business but it could be something totally unrelated.

When I'm seriously looking at a business I always have a really great accountant or attorney looking over my shoulder at the numbers I'm getting. Your team is really important. Put together a great team and you will feel safer about your investment.

Hope this helps.

Apr 25, 2009
Steve Peters
CEO Business Brokerage
Riverside County, CA

E,
Your due diligence phase is very important. It is your opportunity to verify everything you have been told. To this point, if information was verbal, you need to get it in writing. It is more difficult to discredit verbal statements than written information. Please do no make an offer without contingencies allowing you to have an "out". You are out-of-state for me, so I cannot represent you, but I do offer advisory services to help ensure you do this correctly. If you are interested, please shoot me your contact information to speters@ceobizbrokers.com. --- Steve Peters, President, CEO Business Brokerage

Apr 6, 2009
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Franchise Advisory Group
PA

First and foremost check items that can not be fake...tax returns, bank statements, check register, payroll records. Then, depending on the business ask for other information, like register receipts, vendor invoices, etc. Here is the bottom line, if the information makes no sense, or you still have doubts, just walk away from the deal. Remember, the burden of proof is on the seller. On the other hand, don't assume the information is fake, depending on the business, a lot of owners keep manual records. Again, everything must match up.

Apr 4, 2009