18 Jul Buying a Business? Follow These Tips For a Successful Transaction
Becoming a business owner is an exciting achievement, whether you’re buying an existing business or starting one from scratch. Unfortunately, it can also be stressful and complicated, especially for first-time entrepreneurs.
Buying a business as opposed to forming a brand new one has some advantages. You’ll benefit from an established customer base and existing processes and employees. Buying from a previous owner can also mean simpler financing and less risk. There’s a lot to consider, and it’s important to do your due diligence to avoid making common errors.
The legal and financial implications of buying a business are substantial and varied. Keep reading to discover our tips for a successful transaction.
Choosing a business to buy
Find an existing business that aligns with your goals
If you want to build a successful, long-term business, it’s important to choose one that compliments your existing goals, skills, and interests. Being experienced and invested in the industry or field will not only ensure your venture is personally fulfilling, but it will also significantly benefit your financial decision-making and outcomes.
Make sure you understand why the business is being sold
Understanding the motivations of the seller and the circumstances under which they’ve chosen to sell is a key component of achieving success in the buying process and beyond. Owners may decide to sell for a number of reasons, such as upcoming retirement or health issues. However, if they’re selling due to financial hardship or a business failure, it’s important for you to know so that you can make the best decisions possible.
Conducting research and being prepared
As you narrow in on a particular business, you’ll want to gather as much information and data about its operations, finances, and structural characteristics. The last thing you want is to find something out that raises concerns after you’ve taken ownership.
As you gather and review the relevant information, you should work with an experienced business attorney to ensure you’re not missing any critical documents or skipping any necessary steps. Additionally, hiring a CPA and/or other tax or financial professionals will provide invaluable insight and advice throughout the process and should not be skipped.
Here are a few of the most vital aspects to review before you make a decision:
- Licenses and permits
- Zoning laws and environmental regulations
- Organizational documents and certificate of good standing
- Existing contracts
- Building and equipment leases
- Employee information, such as benefits offered and turnover rates
- Financials, including the last few years of tax returns, balance sheets, and cash flow statements
Additionally, hiring a CPA or other tax or financial professionals
Negotiating with the seller
Don’t put all of your eggs in one basket
Even if you have your eyes set on a particular business, it’s a good idea to have other potential opportunities lined up. Not only is it important to have other options in case the deal falls through, but it’ll also give you leverage during negotiations that could significantly improve your chances of securing a good deal.
Remember that a successful transaction is mutually beneficial
As with any negotiation, when it comes to business transactions, buyers and sellers are self-interested. You should do everything in your power to ensure you come out of the deal with a viable business at a fair price. But keep in mind that the most successful transactions are those wherein all parties work cooperatively.
Approaching negotiations with an open mind and friendly attitude can help ensure the process goes smoothly and you end up with the best outcome possible. After all, the previous owner of your new business is a valuable resource for you to succeed.
Hire a business attorney
Whether this is your first time trying to build a business or you’re an experienced entrepreneur, it’s always recommended to have a trusted business formation attorney to help you navigate the process, review documentation, offer expert advice, and advocate for you during negotiations.
Completing the Sale
Develop a sales agreement
Once you and the seller decide to move forward with the transaction and you’ve secured the proper funding, it’s time to prepare the sales agreement. Work closely with your attorney, CPA, or financial professional to develop an agreement that thoroughly details purchasing terms.
Always review documents with your attorney
Before you sign on the dotted line, it’s important to review any and all necessary documents with your attorney. The last thing you want to do when you’ve finally come to an agreement is to overlook an important detail or mistake that could impact your business in the future.
The experienced attorneys at JJH Law help entrepreneurs buy and start successful businesses.
In order to form or acquire a business that is positioned for long-term success, a comprehensive understanding of business laws and regulations is indispensable. The attorneys at JJH Law are passionate about helping entrepreneurs in Oregon and Washington start or buy the businesses of their dreams.
When you work with our expert law team, you can rest assured you’re represented by attorneys who truly care about your success. Contact us today to let us know how we can help you achieve your goals.