So, you’ve found a business you want to buy. You’ve decided it’s the right time, the right location, and the right price. Now what?
There are a few things to consider when purchasing a business, because it is a bigger purchase that can come with bigger responsibilities than buying a car or a laptop. While each sale and purchase of a business is unique, there are a few considerations that anyone interested in purchasing a business should keep in mind.
- Due diligence – do preliminary investigations. Talk to the business’s employees, look into the management, and investigate the owner’s credit history – is this really a business you want to buy, or would it bring you more trouble than it’s worth in the long run?
- Get your documents together – make sure you’re asking for the right things. Ask about licenses and permits, certificates of good standing, tax and financial records, and anything related to the property and zoning laws if they are important in your jurisdiction. You want to know exactly what you’re getting into.
- Make sure the price is right – don’t overpay, get it in writing. Look at the company’s financials and the value of other similar businesses in the area. You’re going to want to think about signing a letter of intent, which could be considered the equivalent of a first draft of the business purchase agreement. This can include things like the price of the property, any assets included in the purchase, and other important details.
Note: Most letters of intent won’t be legally binding to you or the seller, but they are a good way to make sure that the most important details are being put on paper from the start and show intent on both your ends to buy and sell the property.
- More due diligence – inspect the property and keep digging. Continue to pay close attention to any areas that might create potential exposure for you, such as environmental liabilities and tax obligations. Make sure you look at everything ranging from the current lease to ownership records of other assets and conduct an inspection as early as the seller allows you to.
- Negotiate and close the deal – get that business! While all of the previous steps should also be completed with the assistance of an attorney, this is the one where it is the most crucial to have one. This is the part where documents are passed around and signed, keys are exchanged, and meetings are held (in person or online) to confirm that everything has been closed.
As mentioned above, always make sure you seek assistance from an attorney when you are unsure how to proceed. The goal is to make sure you are able to purchase your business with all the information you need along the way, which an attorney can help you evaluate.