How to Make Buying a Business a Smoother Transaction

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When it comes to buying a business, you want the transaction to go smooth.  This means getting a clear understanding of what you’re buying into, and what the deal includes.  After all, you’re in this to make money.   No one wants to worry about taking on a losing proposition.

No doubt there are reasons that you decided to purchase an existing business rather than starting fresh.  For one, you may be familiar with the company’s reputation for providing goods and services.   Hopefully, the business has a customer base that will come over to you.  In many cases, that’s far easier than you setting up shop anew.

Take for example the purchase of a hair salon.   It could be that the owner is only selling because she’s ready to retire.  Meanwhile, the shop has a whole team of trained stylists.  Additionally, it is set up with five stations and a separate treatment room.   Better yet, the hair salon has an established list of regular clientele.   You are more than ready to sign on the dotted line.

Stop for a second.   There are many factors that go into buying an existing business.  Before you rush into anything, you should consider some critical issues. Above all, you want to make sure you understand the deal altogether.  Furthermore, you’ll benefit from an experienced business lawyer committing the transaction to paper.

Some Useful Hints on Buying a Business

For starters, you need to find out why the business was offered for sale.  Retirement is one thing.  However, some sellers can’t wait to dump a business that just isn’t working for them.  More than likely, this means engaging an accountant to review the company books.  Due diligence is vital before purchasing an existing company.

Next, you’ll want to know what is part of the deal.  Does the company have intellectual property rights to certain patents or trademarks?  If you’re buying into a business because of their unique product line, you’ll want to make sure ownership of intellectual properties is included in the sale.

When you are negotiating the purchase of a business, you need to everything that is included.  Is there an existing inventory?  What about physical assets such as office equipment?   You really should not offer to buy a business until you are secure you know what is really part of the sale.

Is there real estate involved?  If the company owns property, you need to determine if the premises will be part of the transaction.  Additionally, your attorney should review any existing leases to determine if they are assumable.

What about the employees?  Returning to our hair salon example, superior hair stylists are often the backbone of such businesses.  Will there be a mass exodus if someone new takes over?  Can you offer some incentives?

Ready to Buy a Business?

If you’ve done your due diligence and are ready to buy a business, you should speak with an experienced business attorney regarding the necessary paperwork.  In a best-case scenario, legal counsel with be involved in the actual negotiations.  Notwithstanding, some entrepreneurs wait until it’s time to draft the sales contract.

A contract to sell or buy a business is a complex document.  It should clearly spell out the terms of the agreement, specifying all aspects of the sale. Additionally, the contract will address existing business liabilities.   Your contract may include clauses known as restrictive covenants.  This language is intended to restrict the seller from opening a competing business near yours.

Buying a business is an exciting transaction.  However, it is essential to get things right from the start.  Otherwise, your prospective profit center could turn into a disaster.

Contact Us

At the Law Offices of Lawrence M. Centanni, we have experience helping clients sell and buy businesses.  Contact us to see how we can assist you.

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