Did your friends have an accountant review the financial statements of the business going back several years? If so, the accountant should have been able to detect a large influx of income and where it came from. You shouldn't buy an existing business without having an accountant and an attorney review everything first.

Don't focus on the scammer. Focus on the business. Do your research and find out whether this business is viable or not. How do you do that? Well. a simple and free way is to check if that business falls in a broad enough category that has its own magazine. If it does, then there is a market for whatever the business is offering. A simple and relatively inexpensive way to check this will be to conduct an online ads campaign. Get a website set up quickly and offer a free report to users who would normally be customers of the business you are evaluating. The report should be related to the business. If people are willing to sign up for a free report then you do have potential in the business. However, if people aren't even willing to give you their email address for the information, it is unlikely that they will give you their money. This campaign can be conducted for around $100 in which you can get a sample of 100-200 people.

I totally agree with blueprintprojec and i want to add to what he said just that in this days and era we have a wonderfull thing called Google. Just search for the name of the business or type the phrase that relates to this specific business and read what others are saying about it. This is a must do research!

spam moved from public view

I had a similar scenario to this. The business dealt with selling mid to high end collectible items from movies etc. Or spin off toys. I did get the accounts verified and checked by an accountant and got the deeds etc checked by an attorney. What happened was that the old owner was making the value of the product 'less' then what he was selling them for to reduce custom payments when mailing them abroad and avoid tax liabilities. So before takeover was complete and an independent stock valuation was done and we found this discrepancy in value compared to what was on his books. I backed out of the deal at this point as a quick revision of accounts done showed with the extra liabilities there would be a loss as opposed to the profit the owner was showing. However I was recommended should I wish to go ahead to get an indemnity clause in the contract covering me for any taxes and payments that were outstanding or applicable due to these practices by the old owner, and since then have always been advised to add that clause and another clasue stating all accounts are accurate so if they are not, if an injection has been done as you state there would be recourse in the courts.

Donace makes a great point. I think it relates to all of us on here when buying an established business. Using the tools at our disposal including accountants, attorneys etc makes a lot of our business decisions quite a bit easier. Those folks are trained to spot these types of issues and can help you craft your deal in a way to give you the most protection possible. Frankly, I wouldn't ever buy an existing business without the indemnity clause attached, it just let's the buyer sleep better at night.

Well said. Survey on site should help getting feedback directly from the users. Research on sites like Amazon can also show if the business is profitable enough to have its own magazine section. But then it would also depend on the kind of business you are looking at. But nowadays with internet you can pretty much get all information about whether the business is profitable enough.

i think the best way to avoid scammer is that no matter do what you should be more cautious .think more while doing smothing don't believe in others easily the more cautious the less there is chance for the scammers

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