There are a million books that are published for people seeking to purchase a business for sale.
Some of the advice is helpful, but a lot of it can be outdated and misguided.
This is an opportunity to consider what works in the current climate and what will pay dividends without falling into common traps.
Instead of rushing the project through, take note of the methods that are used to apply best practice with a business for sale.
Having Legal Aid & Assistance Available
The intervention of lawyers, consultants and agents is very rarely well received when it comes to approaching a business for sale. However, without that legal backing and industry experience at someone’s disposal, they can overlook key contract details and fall into a financial trap that can leave them vulnerable and liable. Thankfully these contractors are available and transparent with their service costs, so it is helpful to have them onboard, even if it is just a means of cross-referencing a document or two.
Assessing Value Independently
Best practice with a business for sale requires the buyer and seller to move aside their own interests for a moment and to allow an independent assessor to survey the enterprise from top to bottom. The value of the business will include physical stock and goodwill as every component is factored into the calculation. If time and resources afford, a second independent assessor can rest any issues to doubt, providing a concise valuation figure that attaches no hidden agendas.
Clarity on Price Position
Commercial buyers who are hoping to acquire an existing enterprise need to have definitive parameters about their buying price. A degree of flexibility is always welcomed, but it is imperative that individuals and groups don’t extend themselves too far given the market conditions and incurring costs that are needed to be calculated. By using the guide of independent assessors and considering what is viable and where there is scope for negotiation, it is in the best interests of the buyer to draw a financial line in the sand.
Find Out How The Business Has Been Tracking
The correlation between past performance and future performance is not always a straight line when it comes to surveying a business for sale. With this being said, the balance sheet and profit and loss statements will be indicative of an enterprise that is making money, losing money or breaking even. What do the financials say? What does the community say? A full review is needed in this regard and any lack of transparency on behalf of the seller will tell its own story.
Investigate If There is Scope For Development & Progression
People who buy a business for sale will rarely sit still in the company and resume normal practice. If that is the idea, why bother paying for the company at all? There should always be scope for progression and development, whether that includes an aggressive rebranding exercise or to make subtle alterations for the sake of adding value and finding efficiencies. Have those plans in place before considering what is possible after paying top dollar.
Confidence in Purchase Motivations
Prior to signing any piece of paper or formalising a handshake with a business for sale, it is beneficial to reflect on the motivations for acquiring the enterprise. Is this a means of adding to a portfolio, to change the trajectory of an organisation, to drive efficiencies, enter new markets or something else altogether? If there is no real plan other than to cash in on a property that appears like it could turn over some money in the short-term, it is not worth pursuing.
