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I am looking to buy a Wholesale business business. Need help to evaluate the business without any records.

This wholesale distribution business that I am looking to buy has been in business for 20 years. But the current owners are very old school and had no accounting system or not even a computer at the facility, therefore no records or sales or profit figures to look at. The business is at a good location and has lot of potential but I need to know how can I evaluate the business because they are just telling me everything verbally.

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The BAF Group LLC

They must have Tax Returns. And they must have invoices from the companies from which they purchase; and they must have receipts from their sales to their own customers. It is a terribly time consuming methodology to do things that way, but that is what you would have to do. If they don't have any of those things - walk away!

And if there is little to go document their claims, I would do nothing more than an "earn-out" sale, where you pay a percentage of sales or profit for a number of years. You won't get any financing for a purchase that lacks records, so the Sellers will have to take a note, anyway. An earn-out would protect you if they are not telling you the truth, and it puts them on notice that they had better be truthful with their claims, if they want to get paid. And "old school" is not what I would term them to be.

Jul 2, 2009

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