Forum Moderators: LifeinAsia
Here is the summary of the business:
Online Commerce Shopping cart for online stores. Includes: shopping cart, product catalog, cross selling, purchase history, shipping, tax and more. The shopping cart builds multiple stores and malls.
The business serves long-term contracts by using overseas programmers at a $10-$20/hr rate. There are 8 or 9 consistent programmers working on these projects. These contracts that last 1-3 years.
Apparently the person is selling the company because it is outgrowing the small size it once was, "one-man-show", and needs an organization with full-time employees.
I have a small IT hardware and software consulting company. We install, and maintain networks for small businesses. We also host (through outside ISPs) websites and contract out basic websites for these businesses. I have very little knowledge of this website programming. I would probably hire someone to maintain this side of the business, if I decided to purchase it.
The business has enough profits to pay for the purchase price within 3 years.
I have basic business questions to ask him, but I don't know enough about this specific industry to ask the more pertinent questions. I was hoping that some of you could list some basic and specific questions I can ask him in the interview tomorrow.
I am also open to any advice on this business decision.
Thanks ahead for your help!
Mike
Future clients are also a must have for continued business success. You must determine the way in which present clients have been aquired, and the activity necessary to maintain these routes of advertising or promotion. It may be good to discuss a handful of randomly (by you) selected current clients, and have the owner explain where they came from and what was done for them.
Another key asset seems to be the outsourced programming team. Crucial questions to ask here are:
- How did he originally recruit the programmers (leads to requirements for the route or contacts to be made available to you)
- The contract they work under (holiday pay, potential liabilities for tax, social security, pension contributions)
- Who assumes liability for unpaid taxes or other fees within their country which relate to before you took over the company?
- Import duty and other arrangements
Finally, support liabilities can be a double-edged sword. On the one hand you may have recurring income for fixed price support, but on the other hand that may potentially use significant amounts of programming time. The real support issues to watch for are 'included support periods'. If twenty of the current clients have 6 months free support, that's a considerable potential liability which you must know about. You'll need to get information about the frequency of support requests, and how long they take to deal with. If the company uses a ticketing system, this may provide a good overview of this.
Other issues to consider:
Whether business emails over the last 3 months should be turned over to you so you have the necessary correspondance to understand the situation of your existing clients.
The condition and arrangements for accounts and other records, the system they are recorded in, and liability for correction if you find they are not correctly prepared in the future.
If you think that the present owner should retain a share in the company. By buying only 75% you aquire a significant part of the company, but the person who may be the most important asset to the company will retain a vested interest in its success.
