Buying a Business

Buying a Business – What You Need to Know

You decided that you’re going to buy a business. You’ve identified the type of businesses you are willing to consider. Up until this point, you’ve done the following:

  • You’ve looked at the business, considered the purchase price, terms and conditions and believe it to be a sound financial decision;
  • You’ve assessed both the strengths and weaknesses of the business, and the business environment in which it operates;
  • You’ve assessed competing businesses and how your business compares;
  • You’ve objectively identified your personal strengths and weaknesses and determined that you are a good match for management of that business;
  • You’ve assessed the purchase price, conditions and terms and determined that you have the financial means and ability to meet the terms of the proposed purchase;

You’ve identified a business that are ready to buy and now you’re ready to take the plunge. What do you do next?

  • Have you or are you about to sign a for the purchase of the business?
  • Have you hired an attorney to review the terms and conditions of purchase contract?
  • Does the contract provide an escape clause allowing you to opt out of the contract before the closing?
  • Have you hired an accountant to review the tax implications of the proposed purchase?
  • Have you hired an accountant to provide you an independent assessment of the purchase?
  • Have you hired an accountant to perform certain due diligence procedures on the representations of the seller?

Buying a business can be one of the most important decisions you will ever face. You will be thrust into a financial contract that will obligate you to meet the terms and conditions of this contract and will almost always require that you pay a lot of money up front — all on the hopes that the business purchase will give you a reasonable rate of return on your investment and provide you with a lifestyle going forward that will demand time and energies in the continued success of this venture. This is where we can help!

Paying thousands of dollars on the purchase of a business without contracting the services of professional advisers makes little economic sense. Experienced, professional advisers can help you to objectively assess and confirm your decision to buy, by independently analyzing the strengths and weaknesses of the target business, assess your personal strengths and weaknesses and how well they match to the proposed target and perform a financial analysis of the purchase price and return on your investment.

The next steps are to perform a financial analysis of the sellers’ representations (due diligence procedures). Let’s face it – sellers’ over glorify the financial returns that they have made.  Similarly, business brokers make their money when you buy — not when you’re just “looking around”. Therefore it is imperative that you perform a complete and thorough analysis of the representations of the sellers before signing the bottom line. Once you sign, you own it and there’s little you can do to escape the terms of that contract.

Hiring an accountant in performing due diligence procedures on the acquisition of a business, it is important that you move quickly in that most purchase contracts provide only a small window of opportunity to perform these procedures and make an assessment. Sellers want to close the deal quickly. They don’t want to take their business off the market for sale to other, qualified buyers and they don’t want to spend lots of time and money while you’re considering alternate purchases or risk that other factors may influence your ultimate decision.

Hiring a team professionals that have the requisite background, training and availability to assist you — qualified, experienced and knowledgeable!  You have limited amount of time to get in and get out! Sellers will have little patience to contract with you and will almost always be less forgiving in negotiating better terms of sale after the first two weeks.

Call us now to schedule a meeting of how we can help you!