Can I believe a seller's claims about his business?

(FSB Online) -- Dear FSB: I want to buy an existing store. How do I know that it is priced correctly and that all the financial statements, such as gross sales and net profit, claimed by the seller are true? Assuming I do buy this business, do I need to leave my job and manage it full-time?

- James, Los Angeles

Dear James: Make sure you get expert help to evaluate what the seller says, advises Ronald J. Cappuccio, a business lawyer in Cherry Hill, N.J. "You need the assistance of a business and tax attorney to review the financial statements and tax returns," he says. "If you are considering a store that has been open for a long time, at least five years' statements and tax returns should be reviewed."

Cappuccio advises checking all invoices from the shop's suppliers, as well as its operating expenses, to confirm the owner's purchases. This will help you to evaluate the inventory of equipment, products, and other goods that will be available to you if you buy it.

And yes, managing this venture will be your new full-time job. "You need to forget about maintaining your present employment and running the store," warns Cappuccio. "Do not be surprised if your typical week is 70 to 80 hours!"

For more insight into buying a business, check out our story, "What is an asset sale?"