From Ed Pendarvis of Entrepeneur.com, here are four things to consider when evaluating a business:
Choose a business you like. You'll know if you like the work the business does, and if it is within your realm of experience. If you hate the work, it doesn't matter how good of a business it is, it will be a major challenge for you to run successfully.
Probe the seller. While this may sound like just good sense, it is crucial to getting a feel for the business. Find out how long the owner has owned it, how it is performing, and why it is being sold. Once you have the answer to these questions, you will be closer to figuring out if it is the right purchase for you.
Weigh the value drivers of the business. These include location, inventory, trained employees, established customer base, existing cash flow and how it stacks up against the competition, among others.
Don't have unrealistic expectations. Financing in today's market will be difficult. To facilitate the financing, enlist a business broker, who can be helpful in this area. Also, expect to negotiate the selling price. It will need to work for both you and the seller for the deal to go through.