With the numerous challenges associated with starting and running a business from scratch, many people are finding it more convenient to buy an existing business instead. If you are looking to buy one, you need to understand that it is among the biggest commitments that you’ll make in your life. While it may appear like a straightforward process, due diligence and observance of the legal requirements is key to a successful transaction that you are less likely to regret. Balancing between the various requirements will prove demanding but worth the hassle at the end of the day. Here are the major steps you need to take to buy a business.
Identify the Right Line of Business
The kind of business that you should go for will depend on your needs and interests. It should also be determined by location. For example, if you live in the Houston are and are not willing to move, you should seek out businesses for sale in Houston or the Houston area. You’re bound to come across numerous businesses with immense potential and find yourself spoilt for choice.
Making up your mind regarding the specific line of business that you should invest in will help minimize the confusion, as it will allow you to focus on a few businesses that strictly lie within your industry of choice. You do not want to find yourself in a business that is not in line with your passion. If you go into a business that does not interest you and is being done purely for the money, you may lack the energy and perseverance needed to overcome the challenges and push through successfully. Make sure have the skills and experience necessary to run it. If you are looking to buy the business jointly with a partner, you can still consider a line of business where you do have the required skills as long as your partner has them and will be in a position to cover the gap. Getting things right at this stage will reduce the amount of time and resources that you’ll have to spend on those that follow.
Proper research is paramount on each of the prospective businesses you are looking at. This allows you to get a good understanding of the business before committing your money to it. Doing this research will enable you to identify the key strengths and weaknesses of the businesses under consideration and ensure informed decision-making. You should request the respective sellers to provide you with copies of the financial statements of the business for analysis to determine the firm’s true financial position. Seek further information on some of the major clients and suppliers. Find out some of the major deals the company has handled and those that are integral to its success. Some businesses rely heavily on a few major clients, without whom it may be hard to make significant sales and profits. Another important consideration is details on the business’ liabilities and debts. You do not want a situation where you find yourself having to cover for liabilities that you were not aware of at the beginning. Worth noting, however, is that most sellers will require that you sign a non-disclosure agreement with them before allowing you to access such information. As such, make sure to have a lawyer by your side to advice on such issues. This will help you to avoid unprecedented commitments. Counter-check some of the information provided by the seller with information available on government databases.
Make an Offer
Once you’ve made up your mind about purchasing a given business, make the seller an offer. An offer is not as simple as pronouncing your preferred purchase price. It entails different aspects that may require the services of a lawyer. There is no standard document outlining contents of an offer. In a case where you’re not conducting the transaction via an agency, you’ll need a lawyer to help you with the drafting of an offer and acceptance that it is legally binding. Ensure that the vendor confirms all of his or her claims regarding the business for sale in writing to enable you to claim damages in case some of them turn out to be inaccurate. Your offer and acceptance should include clauses that allow you to withdraw from the agreement in case the vendor fails to meet their side of the conditions. Once you reach a deal on the price and terms of sale, you’ll need to organize for the transfer of the relevant papers including licenses and registrations.
Featured image link: https://pixabay.com/photo-336368/