Business brokers think this will be a great year for purchases and sales of businesses. One of the factors cited is Baby Boomer retirement. This will only increase during the next several years as they look to cash out their equity in small businesses to fund retirement.
If you’re considering buying one of these businesses, be sure that you’re not overpaying. Many small business owners have an overinflated view of the value of their enterprises, mistaking personal pride for something that should be part of the purchase price.
One common red flag to consider is the seller who operates with two sets of books – one for the IRS and one which he uses to justify the asking price for his business.
Run, don’t walk, away from such an “opportunity.” The person who commits tax fraud will cut corners elsewhere, leaving you with liability exposure that will outweigh the upside of the deal.