Buying an existing small business is a gamble - but well worth it if you take the necessary steps to make sure the business is solvent, in good standing with the public and that you won't be taking on more than you bargained for (such as debt or damaged/outdated inventory). You can't be certain of its success, but there are some steps you can take to help uncover any pitfalls a business for sale might have. Here are some things to check into before you make your final decision.

Locate your competition When searching for an existing business to buy, do your homework! Find out where your competition is, including new construction. When you buy that little café only to find that there's a commercial chain coffee shop going up across the street, it'll be too late! Most city newspapers publish a listing of new businesses each week, and there's nothing wrong with asking a question or two at a suspect building site near your location. You can also contact the chamber of commerce in the city your new business will be located. Business licenses are public record, making it perfectly acceptable to ask about new businesses and their locations. It's worth the legwork to know where your competition will be before you put a down payment on your new business.

Check the date! If you're thinking of purchasing an existing business including back-inventory, be sure to make certain that the inventory is not expired or defective. You may think you're getting a good deal when the seller tells you all back-inventory is included in the sale price; however, all you're really getting is product you can't sell or return for credit. Thoroughly investigate back-inventory to verify its worth before it's your problem to dispose of!

Business Debt: Now it's your problem. Be sure to ask about all existing debts in the business's name. When you buy that business, you get everything that comes with it, including debt. Loans made directly to the business do not travel with the seller - nor are they forgiven when a new buyer takes over.

What's the word around town? Just because you adore the quaint hardware store two-towns over doesn't mean the store's customer base feels the same way. Changing the minds of patrons who've had a bad experience with an existing business is a challenge. Hanging an "under new management" sign does not always do the trick. Casually ask people in the area what they think from a customer's point of view: "I've been thinking of stopping in XYZ Hardware - what do you think of that place?" or "Can you recommend a good hardware store?" This will get people talking candidly. Don't let them know you're thinking of buying; you may not get their honest opinions.

Want to see it from the inside? Take it for a test drive. You want to buy an existing business and have finally narrowed it down to the one you're most interested in. If you're working directly with the seller, ask if you can take it for a test drive by working there a week or two. Most sellers will be more than willing to let you "intern" there to see how the business runs from day to day. This will provide you with a first-hand look at some very important factors, such as the customer base, the average sales per day or week, the amount of time you'll need to spend there, and a chance to meet some of your future suppliers and vendors. You may realize that this type of business is not for you after all, or you may find it to be your dream-come-true. You won't really know for sure unless you get your feet wet. (Note: Only request a "test drive" if you're serious about making an offer. No seller has time to entertain individuals with a casual interest).

These are just some of things you should be aware of as you seek to buy an existing business. Though it is generally accepted that purchasing an existing business is less risky than starting something new, you should always be sure to check everything out before making a down payment. Remember - once it's yours, it's yours!

About the author:

Karen Torbett is founder of Venture Point, LLC (www.VenturePointOnline.com). She spent almost a decade running someone else's company before she achieved her goal of business ownership. Now, Karen helps entrepreneurs like her seeking to buy or sell a business on their own. Contact her at: Karen@venturepointonline.com.