A is for accountant: Involve your accountant from early on. Ask your accountant to help you put a value on the goodwill and to look through financial statements with a fine-toothed comb.

       B is for Balance Sheet: Pay particular attention to the book value of assets and liabilities.

        C is for creditors: Make sure the contract includes a statement that any money owed to creditors is the previous owner’s responsibility, not yours. If the business receives deposits from customers in advance, remember to include details about who owns the liability of security deposits in the contract.

       D is for debtors: Clarify whether any money owed to the business from customers is owed to you, or to the previous owner. If the money is owed to you, detail the total value in the contract, and make an allowance for bad debts. In addition, ask for an aged debtors listing (that is, a listing of outstanding customer debts, grouped according to how old each debt is). The longer an invoice has been outstanding, the less willing you should be to take it on.

       E is for employees: Determine whether existing staff are going to stick around (ideally, you want to have flexibility over the decision whether they do or don’t). You also need a list of all employees, including relevant awards, hours worked and hourly rates, holiday, personal leave and long service leave due, and superannuation, and ensure the purchase price is adjusted downwards for all employee leave liabilities. Find out when these employees last had a pay rise, and whether another pay increase is likely.

       F is for family: Beware the family business where the extended family all pitches in, sometimes for minimal pay. When deciding how much you’re prepared to pay for a business, adjust the value to incorporate enough wages to cover all of these hours.

       G is for guarantee: Try to include a clause saying that the contract can be revoked if any of the information included in the contract, or supplied with the contract, isn’t right. Some contracts even require 10 per cent of the sale price to be held in trust for a period of six months or so, and only released if all conditions are met.

       H is for help! Consider whether you want the seller to work alongside you for an initial period so you can learn how everything works. If you do, detail for how long and under what conditions.

       I is for inventory: Agree on the method of valuing stock and clarify what stock items you’re willing to pay for (refer to the section ‘Clarifying what the purchase price includes’, earlier in this chapter, for details).

       J is for job description: Do existing employees already have job descriptions? If so, ask for copies.

       K is for knowledge: The knowledge held within a business often represents a significant intangible asset. Ensure the previous owner provides you with written procedures for core business activities. If these procedures don’t exist, negotiate to have them written.

        L is for legals and leases: Chances are buying a business is one of the most significant financial decisions you’re ever likely to make, and quality legal advice forms a vital part of your protection. Oh yes, L is also for leases: Identify any current leases for fixed assets or for rental premises, and when these leases expire. For retail businesses, ask yourself if the lease weren’t renewed, would you still have a viable business?

       M is for maintenance: Is the equipment well-maintained or has it been run down?

       N is for names: Make sure the business name (as well as any associated domain names, patents, permits, registrations or trademarks) is signed over to you.

       O is for ownership: Make sure that nobody other than the owner has legal rights to the assets. This ownership status is particularly important in regard to any intellectual property or leased items.

        P is for profitability: Make sure you obtain Profit & Loss statements for a minimum of the last three years, certified by a public accountant. Examine all expenses and ask whether they’re reasonable. Do you think expenses are going to increase or decrease under your reign?

       Q is for QuickBooks: Or MYOB or Xero for that matter. If the owner already subscribes to accounting software, ask if they can export all of the lists (the accounts list, the customer list, the supplier list and the employee list) into an Excel spreadsheet. You can then import this information into your own accounting software, thereby saving hours, days or even weeks of typing.

       R is for restrictions: Consider whether you want to add a restriction clause preventing the seller from starting up a similar business in the area and for what period the restriction applies.

       S is for sales: How many customers made up the bulk of previous sales? If a substantial proportion of sales come from only one or two customers, can you be sure these customers are going to remain loyal to you? Examine trends both for total sales and for profitability. Scrutinise sales figures on a month-to-month basis and make sure you understand the reason behind any inconsistencies, seasonal variations or trends. Downward trends are almost always of significant concern.

       T is for technology: Is the business likely to continue its success? Be aware of the impact that technology may have on this enterprise. For example, an appliance repairs business may experience dwindling demand as decreasing costs mean that replacing appliances, rather than repairing them, becomes the trend.

       U is for utilities: Organise to get electricity, gas and water transferred to your name, and clarify what happens with these bills at handover time.

       V is for vendor: Make sure you know who you’re dealing with. Conduct a name search on the vendor. (I recommend you check them out both on Google and Facebook, and ask your solicitor to conduct a full credit check also.)

       W is for workers compensation: Are any workers comp claims outstanding? What is the safety record for this business?

       X is for X-ray vision: Something you’re going to wish your solicitor has.

       Y is for why: Yes, I know I’m pushing the envelope here as far as the alphabet is concerned. Never mind. Why is the business really for sale?

       Z is for Zebra, Zebedee and Zulu: Yeah, right.