How To Buy A Real World Business For Sale
If you have never been involved in buying an existing business for sale, you could be cautious and see the road ahead as fraught with danger. The standard transactions can appear to be very unusual, especially as you are dealing with many intangibles. It's not like buying a house or a car, where "what you see is what you get." When you consider elements such as goodwill, critical to a service related business, many factors have to be considered. Remember that while you will have to focus on elements such as a maintainable client list and that goodwill, other areas and documents must be explored during your process of due diligence.
Always remember that there are two different viewpoints here. The seller will have a clear indication of the worth that he or she places on the business. This may often be inflated by a natural enthusiasm and the sheer amount of hard work and dedication that may have been put into the business to this point. While you should always maintain an element of respect for the seller's point of view, you must look at all documentation and evidence in the hard light of day and understand that it is up to you to determine if you should buy business interests according to the specific value for you alone.
If you have decided that you want to go ahead and investigate whether the business is really of interest, be prepared for a lengthy process. This may be quite challenging at times and while you need to maintain your common sense, a good dose of humor would be handy as you develop great levels of communication with the seller.
It is highly recommended that you bring in expert advisers and utilize proven resources, especially if you have no real experience of running a business in this line, or niche. Don't think that you can just hand off all the documentation and essentially the decision-making to these people, however, as the decision must be made, in the end, by you! Be prepared to review all documentation and financials yourself first and be sure that you get a reasonable feeling about them all before handing them off for further processing.
Always be wary if some of the financial documents are either missing or incomplete, or are not balanced and reconciled correctly. Certain precedents must be maintained and accounting procedures completed. You may be asked to sign some nondisclosure or noncompete documents before these are made available, but the financials are the rock upon which everything else is built.
No two businesses are alike and every operation is dynamic in its own right. So many external influences are involved and any number of different events can come to bear to create a variety of different situations. Expect to uncover some unusual facts and figures or surprises and remember that, while industry benchmarks are interesting, a lot of the information you discover here will be a function of real-world activities.
About the Author
Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation - The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business. Want to find out more about business buying strategies that really work, then look no further than=> http://www.diomo.com/
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