Business acumen is not the only prerequisite for successfully buying or selling a business. Having the right information at the right time can make or break an investment. If you are considering selling your business, or if you are looking to acquire a business, you need to understand all the possible ramifications of the transaction.
Buying a business
The feeling of excitement that comes from matching your skills and interests with an existing business is hard to beat. When you see an opportunity that you know you could make the most of can leave you overeager. Even if your skills are a perfect fit, there are still things to consider before getting involved.
Due Diligence
Someone selling a business is not likely to volunteer the potential drawbacks of the entity. You need to conduct a thorough review of the business to develop a true understanding of its value. This includes taking a deep dive into the following:
- Accounts payable
- Accounts receivable
- Balance sheets
- Cash flow statements
- Employee records and contractual obligations
- Outstanding contracts
- Real estate obligations, including real property owned and leased
- Ongoing legal proceedings
- Past lawsuits
There are often red flags that impact the true value of the business.
Selling a business
For most business owners, the primary consideration in selling is maximizing value. There are many factors involved in getting the best price for your business. It is important to develop a plan in advance to make the most out of your business. The sooner you begin preparing, the more likely you are to find the right buyer at the right price. You need to consider various elements, including:
- Tax implications
- Intellectual property
- Value of your brand
- Goodwill
- Financing structures
- Asset valuation
- Ongoing legal responsibilities
If you are currently involved in any disputes or have any concerns about potential lawsuits in the future, you need to discuss that with a skilled business litigation attorney to make sure your rights and obligations are clearly spelled out in the sales agreement.
Buying and selling businesses carries enormous potential to improve your financial position. Handled correctly, these deals can set you up for a far brighter future.