1. Competition. The prospective buyer should look into the extent, intensity, and location of competing business. In particular, the buyer should check to see whether the business in question is gaining or losing in its race with competitors.
2. Market. The adequacy of the market to maintain all competing business units, including the one to be purchased, should be determined. This entails market research, study of census data, and personal, on-the-spot observation at each competitor's place of business. 3. Future community development. Examples of future development in the community that could have an indirect impact on a business include a change in zoning ordinances already enacted but not yet in effect and a change from a two-way traffic flow to a one-way traffic flow.
4. Legal commitments. Legal commitments may include contingent liabilities, unsettled lawsuits, delinquent tax payments, missed payrolls, overdue rent or installment payments, and mortgages of record against any of the real property acquired.
5. Union contracts. The prospective buyer should determine what type of labor agreement, if any, is in force, as well as the quality of the firm's employee relations.
6. Buildings. The quality of the buildings housing the business should be checked, with particular attention paid to any fire hazards. In addition, the buyer should determine whether there are any restrictions on access to the building.
7. Product prices. The prospective owner should compare the prices of the seller's products with those listed in manufacturers' or wholesalers' catalogs and also with the prices of competing products in the locality. This is necessary to ensure full and fair pricing of goods whose sales are repotted on the seller's financial statements.