Buying an existing business can be less risky than starting from scratch. Some reasons for buying a business include reducing uncertainties faced when starting a business from the ground up, acquiring a business that has ongoing operations and established customer and supplier relationships, and obtaining an established business at a price that is less than what it would cost to start from scratch. There are many ways to find businesses that are for sale. This includes publications, brokers, word of mouth, professional organizations, bankers, accountants, and attorneys.
While buying a business can be less risky that does not mean it does not have risk. When investigating and evaluating a potential available businesses, it is important to use due diligence and rely on the opinions of professionals. Accountants, attorneys, and other experienced business owners can help throughout the process. Some important things to consider when evaluating a business involve:
• Finding out why the business is for sale
• Reviewing financial statements and tax returns for prior years
• Reviewing licensure and tax filings
• Recognizing that financial data can be misleading
• Adjusting the financial statements to reflect the true state of the business
• Determining a true value for the business
Once the business you are interested in purchasing is decided, negotiating and closing the deal must be handled. This is best dealt with using a third party. The terms of purchase must incorporate the included and excluded assets or indemnification for prior activities, and payment plans. When closing on the purchase of the business an attorney can help negotiate the contract; bill of sale and other related closing documents; representations and warranties; guarantees; certifications; and payment-terms to-seller agreements.
At the law office of Craig M. Dorne, PA, we are well qualified at helping you through this process. For more information please schedule a free consultation or call us at (305) 531-7890.