One of the reasons buying a business is a lot easier and simpler than most people
realize is because there are basically only two “technical” things you need to know
and understand.

One is a company’s balance sheet. The other is what is called a “profit and loss
statement.”

Now, you don’t need to be a whiz at accounting to understand it, because if you are
buying a business you should have a CPA eventually come in and analyze it for you.

However, the key to buying a business with little or none of your own money is to
do as much as you can before bringing in the professionals.

And one important thing you can and should look over before spending too much
time looking at a business is the profit and loss statement.

Why?

Because, when you understand how it works (look online if you need to) you will be
able to tell when people are cheating on their taxes, playing around with numbers
or trying to cheat the IRS.

It’s true.

In fact, when I was doing business buying seminars I used to have IRS agents sitting
in the front row.

Not because I was doing anything wrong, but because I was current on all the latest
scams (from seeing so many profit and loss statements) and they were learning
from me.

And what you need to know before looking at a business profit and loss statement
— besides the bare basics of how to read them — is that the average profit and loss
statement is not set up to run a business.

It’s usually set up to lower the tax bite.

And you need to know most profit and loss statements are rigged a certain way.
And the only way to tell if it’s a good, profitable business, is to understand the
simple profit and loss statement.

It’s not difficult to do and you can probably learn the basics free online, or for a
small fee from your local CPA.

But whatever the case, make sure you know what you’re doing when looking at a
profit and loss statement. It will help you identify the good from the bad. And save
you a lot of trouble and money.

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