Steps in Buying a Business

  1. Distinguish from which industry the business you want to acquire should be in

This entails your previous experiences and developed skillset. You have to consider which specific industry you’re familiar with. The business that you’re eyeing should be something that can let you maximize your strengths. It might help if you make a list that will help you decide. Are you into food? Or are you more inclined into more technical stuff? Do you like meeting new people? Or the organizer type of person? This list may help you deduce the wide array of businesses available that you can choose from.

You may also opt to talk to some of the people in the business field who know you well. They may give some insights that may help you in making the decision. You may also consult business magazines or trade newsletters that can give you different perspectives on the business that you have chosen.

Do take note of legalities and regulatory changes that might have taken effect within the industry that you are targeting.

  1. Pick out the business that you aim to purchase

In targeting a specific business, you have to bear in mind the budget that you allotted for the acquisition, as well as the size and location of the business. Aside from this, you also have to consider the customer base, the existing manpower, the processes and systems of the businesses that keep the operations running, and the success rate of the businesses in terms of the cash flow and growth.

You may seek for businesses for sale on newspapers and online marketplaces. If you’re aiming for a business in a specific location, say for example in Edmonton, Canada, you may just type in the search engine “business for sale in Edmonton”. The website will present all the businesses that are currently in the market in the said area.

You may also create your own “businesses for sale Edmonton” posting on websites like Craigslist to let people what you are seeking.

Note that there are some businesses that are not listed as for sale. You may also consider looking into these and eventually persuade the current owner/s to put it on sale. This puts you in a good position to negotiate at a favorable rate.

  1. Do a research

Get your first-hand experience of the services/products of the potential business that you plan to purchase. Head on to the business districts of location that you are targeting, say Edmonton and disguise as a customer. This will give you a glimpse of how the business operates even before you sign a nondisclosure agreement just to get more crucial details about the company.

  1. Inquire

Ask the current owners with the basic questions like:

  • What’s the reason for selling?
  • What is the growth plan for the business?
  • What changes has the business undergone?
  • How long have the employees been with the company?

You may also ask questions on the suppliers and existing customers of the business. Tell them to give you details on their transactions with the company.

  1. Build a consulting team

The need to tap a trusted lawyer, accountant, and a broker might arise to make it easier for you to make that choice. They will help you sort the data provided by the business.

An accountant will be very much of great help when it comes to the valuation of the business and the review of the financials. In appraising a business, one must take into consideration the value of the assets that are included in the sale. But turnovers, profitability, and the existing contracts must also be considered in the valuation. Someone who has an expertise in this field will be able to assist you in coming up with the best offer value. The accountant will also be able to give you an understanding and an opinion if it’s a go or a no-go based on the historical financial statements and the trends that the business have.

A broker can represent you when it comes to negotiation. He/she usually has the better perspective when it comes to business purchase and can set a favorable rate (with the consideration of the valuation, of course) to be negotiated with the current owner/s.

  1. Heads of Agreement

This is a non-legally binding document that basically summarizes the key elements of the acquisition. The payment, responsibilities of each party will be detailed in the document. Timelines and deadlines will also be plotted until the full completion of the acquisition.

  1. The Sale and Purchase Agreement

This officially marks the final stage of the acquisition process. This document presents the legal obligations of both the seller/s and the buyer for the purchase.

  1. Payment

Buyer can be presented with different payment options, depending on the size of the acquisition. For large-scale businesses, buyers may have to ask for financial assistance from different sources. But for small companies, may opt for the straightforward payment.

  1. Completion of the acquisition

Once all the necessary documents have been signed and the payment has been made, you have already made a successful purchase of a business that you plan to expand and grow.

Leave a Reply

Your email address will not be published. Required fields are marked *