Small Business

The gross profit on inventory is divided by the average profit of the inventory. Low end items may be marked up 500% while a high end is only 30%. Usethe average profit across all inventory items. If the average is 10, that means for every dollar you invested, you earned $10 more in profit.

Why are you selling your business? How many years have you been in business? How many years have you been in business at the present location? Did you create the business or did you buy the business from someone else? Do you have a formal sales agreement prepared that I could have my lawyer look at? Are you a sole proprietorship, partnership or S or C corporation? Do you have tax returns and financial statements that my local CPA can look at? Which bank do you do business with? What types of insurance must your business carry? How many hours did you work per week in your business? How many employees do you have? Do family members work in your business? Will the family members stay after the sale? What type of entity are you? Are you willing to take a note and be paid over time instead of all at once? Will you stay and work for a while after the business is sold? How is inventory controlled? How often do you take a physical inventory?

Does the franchise give you an exclusive territory for the length of the franchise period, or can the franchiser sell other franchises in your territory? Under what circumstances can you end the franchise contract, and at what costs to you? How many years has the firm offering you the franchise been in operation? If you sell your franchise, will you be compensated for your goodwill or will it be lost to you? Does the company offering you this franchise have a reputation for honesty and fair dealing among its franchisees? Has the franchiser shown you any certified figures indicating exact net profits of one or more of its members, and have you personally checked the figures with these people? Will the franchiser assist you with: a) A management training program? b) An employee training program? c) A public relations and advertising program? d) Capital? e) Credit? f) Merchandising ideas? If needed, will the franchiser assist you in finding a suitable location? Is the franchising firm adequately financed so that it can carry out its stated plans? Does the franchiser have experienced management, trained in depth? What can the franchiser do for you that you cannot do for yourself? Has the franchiser investigated you carefully enough to assure itself that you can successfully operate at a profit to both of you? Does your state have a law regulating the sale of franchises, and has the franchiser complied with that law to your satisfaction? How much equity capital will you need to purchase the franchise and operate it until your income equals your expenses?

The cash flow statement provides a summary of the firm's operating, investment and financing cash flows and reconciles them with changes in its cash and marketable securities during the period of concern. The cash flow statement is sometimes called a source and use statement. This statement will reveal whether or not the cash generated by the business is enough to pay the principle and interest on the financing required to buy the business.

Some variables that may be negotiated to complete a deal is; the amount of the down payment, the interest on a note taken back, the time the seller is willing to carry the note, all cash verses cash and note deal, the possibility of a consulting contract for the seller as part of the purchase price.

Cash accounting is never mandated by the IRS. In other words, there is no tax-related scenario that forces you to adopt cash accounting Accrual accounting is the system you must use if: 1.You have more than $10 million in annual gross receipts. 2.Your gross annual receipts are less than $10 million but over $1 million and your primary business activity can be classified as wholesale, retail, publishing, sound recording or mining. 3.You are a partnership or tax shelter. 4.You are a farming corporation that meets certain IRS rules listed in Publication 225.

You can file online Form SS-4. Go to www.irs.gov/businesses and click on Employer ID number. Your local IRS Service Center can also assist you in getting a Federal EIN. Call IRS at 1 800-829-4933.

The best source document to use is a calendar diary. Enter the odometer readings at the beginning and at the end of each trip. Enter any actual auto expenses incurred on the trip. At the end of the year you may be able to optimize between the higher of the actual or mileage rate expenses. Enter the names of company or the people you met with. Enter the business purpose of the trip. Enter any meal or entertainment and other miscellaneous expenses incurred in addition to using your car.

The address is www.irs.gov