One of the reasons buying a business is a lot easier and simpler than most people realize is because there are basically only two "technical" things you need to know and understand.
One is a company's balance sheet. The other is what is called a "profit and loss statement."
Now, you don't need to be a whiz at accounting to understand it, because if you are buying a business you should have a CPA eventually come in and analyze it for you.
However, the key to buying a business with little or none of your own money is to do as much as you can before bringing in the professionals.
And one important thing you can and should look over before spending too much time looking at a business is the profit and loss statement.
Why?
Because, when you understand how it works (look online if you need to) you will be able to tell when people are cheating on their taxes, playing around with numbers or trying to cheat the IRS.
It's true.
In fact, when I was doing business buying seminars I used to have IRS agents sitting in the front row.
Not because I was doing anything wrong, but because I was current on all the latest scams (from seeing so many profit and loss statements) and they were learning from me.
And what you need to know before looking at a business profit and loss statement -- besides the bare basics of how to read them -- is that the average profit and loss statement is not set up to run a business.
It's usually set up to lower the tax bite.
And you need to know most profit and loss statements are rigged a certain way. And the only way to tell if it's a good, profitable business, is to understand the simple profit and loss statement.
It's not difficult to do and you can probably learn the basics free online, or for a small fee from your local CPA.
But whatever the case, make sure you know what you're doing when looking at a profit and loss statement. It will help you identify the good from the bad. And save you a lot of trouble and money.
About the Author
Arthur B. Hamel has bought over 200 businesses in the past 40 years, and is a well-known author, consultant, investor, business owner, and dynamic lecturer who has shared the stage with such business greats as Robert Allen of "No Money Down" fame. For the past 20 years Art has taught thousands of people around the world -- even so-called "little guys" with no formal education or money -- how to quickly and easily buy large, multi-million dollar businesses with no credit, banks or prior business experience. He has recently decided to share his unique business-buying secrets and tactics free of charge at: http://arthurhamel.com
