If you want to buy a business but you just don't have the capital, take heart, there is a way. You can lose your shirt, your savings, your home and maybe your family if you make wrong choices, but done correctly, you can buy yourself a job for life.

Let's first examine the implications of buying an existing business, then look at some factors you need to consider along the way to guard yourself against failure.

YOU ARE BUYING A JOB, NOT A BUSINESS
Let's face it, buying a business (or a corporate franchise) is the same as buying a job. The differences are that you have yourself as a boss, and you will permit yourself to work 60 to 70 hours a week instead of the 40 to which you've been accustomed. Don't get me wrong, there's nothing wrong with working long hours in your own business, I just want you to be absolutely sure that is what you want to do.

CALCULATING THE WORTH OF THE BUSINESS
Hire a CPA. Don't believe a single word of the person selling the business. Sickness, age, family matters . . . are all 'suspect' reasons for selling out. If it was such a good deal, he or she would still be raking in the big bucks, not selling out to you. Many business owners can see the handwriting on the wall and want out before sales start going down, and down, and down.

Make it part of your pre-sale agreement that your CPA will have full access to the books and can contact customers, suppliers, landlords and other participants where necessary. You've got to know the truth if you're going to negotiate successfully.

BEWARE OF 'GOOD WILL'
You can't eat it, you can't take it to the bank and cash it in, and you can't borrow money on it. Good will only works for you in certain very narrow areas. It is especially useless if that good will has been built on the reputation of the former business owner. You're the new kid on the block, and you have not yet paid your dues.

The value of good will to you is a big fat zero. Don't let the former owner's reputation delude you into thinking you will benefit. Here's a typical customer response: "Well, Mike used to do 'that' for me and he never charged me for it." True or not, and whether you give 'that' away to the complainer, you have lost a customer. "It's not the same without Sam" is what you'll hear, and the next thing you'll hear is that the 'good will' customer is doing business with someone else.

PREDICTING THE INCOME STREAM
You'll hear the story, "Oh, I make a lot more than the books show--you know--IRS and all that..." Usually accompanied by a wink and a nod, this bit of fairy tale can sink you and your new business before you can say, "IRS Audit." Yes, it's true that as a business owner you are allowed to deduct certain costs of doing business that you cannot deduct as a private non-owner citizen; but beware the wink and nod, there may be serious legal implications of what has been done in the past, and you could inherit some of these problems.

In addition, the wink and nod may be the seller's way of trying to con you into believing the business makes more money than the books show. If this is the intent, ask yourself: "If the seller is willing to cheat others, is he or she planning to cheat me?"

CALCULATING YOUR SALARY
Forget it. You're not going to be able to take any money out of your new business for at least 2 years, maybe longer. No matter how well you research the opportunity, no matter how great the picture, no matter how much the seller tells you he or she takes out, there will be unexpected expenses which will either exactly match or exceed any money you thought you might be taking out for yourself.

In addition, if you sign any kind of deal with the former owner to finance part of the purchase, any money not tied up in making the business work will go to the former owner, not you.

VALUE OF EQUIPMENT
Old, outdated, inefficient or insufficient equipment will sink you. Visit a similar business in a nearby town and ask questions like: "What equipment and supplies will I need to have on hand to satisfy my customers?" or "I have 'this' equipment, when will I need to upgrade to satisfy my customers?" It doesn't matter what the book value says, if it isn't current state-of-the-art equipment, it's value is close to zero! In fact, it may have a negative value if the cost of updating is significant, and you could go broke just trying to keep antiques running!

VALUING THE INVENTORY
Don't believe any written inventory report. Take a copy of the published inventory if there is one) and make a personal physical count. Divide the entire inventory into three parts: that which is new, clean, current and saleable, that which is saleable only at a massive discount, and that which should be thrown out as it costs more to leave it on the shelf than it is worth. Price the inventory using these criteria, and you'll discover it is probably worth less than half the asking price.

PAST DEBTS
Watch out for this one! People wanting to get rid of a business often do not put loans on the books, but handle them as an individual loan to them, even though the business is responsible for payment. Even those on the books are dangerous as banks and other money lenders may issue a 'call' for the total amount of the loan when a sale takes place. They don't know you, so they want their money... NOW!

LEGAL MATTERS
Hire an attorney. It is the only way to protect yourself. Don't use the seller's attorney, he works for the seller, not you. Call your local lawyer referral agency, or if you don't have one locally, call a couple of attorneys listed in the phone book and ask if they specialize in buying and selling businesses. Make sure of the specialization! It is not in your best interest to use your wife's cousin's friend who is a great divorce attorney. You need an expert to protect your interest.

FINAL NOTES
Remember that old adage, "Let The Buyer Beware!" Don't take anything at face value. Check and recheck everythihg.You may discover you can buy the business for a song, and your hard work will get you the loan from the money lender you need to make it work. Much profit to you!