Both buying and selling a business share a fundamental common denominator called "Due Diligence." There are a number of different yet in many ways similar obligations that the buyer or seller must perform to uphold the "Purchase/Sale Agreement."
When buying a business be realistic in assessing your interests and expertise to determine which one is right for you. Some obvious advantages in buying an established business are the time, money and effort needed to start a new, and possibly uncertain, business. Owning any business requires a 24/7 commitment from daily managerial decisions to actual physical labor. Once you've identified the "right business" you need to find it. The most common ways used in researching a specific business are the Internet, trade publications, newspapers, word of mouth and business brokers. After locating the potential business you must conduct your inquiry with "due diligence":
- request all business records relating to past and present financial stability and sign a proprietary information/non disclosure statement;
- have your lawyer and accountant examine the business records;
- analyze assets, liabilities and potential future growth;
- negotiate a fair and equitable price, that you would agree to pay;
- write a comprehensive business plan for operational and financing purposes.
Buying a business is basically motivated by the desire to "own your own business", while selling one is usually prompted by a variety of personal circumstances in your life. However, as the seller, you have the same requirement to fulfill your obligation of "due diligence":
- give an honest explanation of the reason for selling the business;
- sale price should be fair, equitable and negotiable;
- produce all business records requested;
- present an appraisal of assets, liabilities, future revenue, name recognition,customer/client base and other entities incorporated in the sale;
- the total Business Purchase/Sale Agreement will also include payment schedule (if owner financed), ongoing support after sale, non compete clause and conditions to close transaction.
When closing the transaction, your attorney should be involved for your protection. Either the buyer and seller or a third party firm completes all paperwork and conducts the closing process.
To help you "Buy Or Sell" your business, SCORE, A Resource Partner of the U.S. Small Business Administration, offers free, confidential one-on-one business counseling with experienced executives plus a day long monthly Workshop for a nominal fee. For the location, phone number and counseling hours of the office nearest you, call our main Dallas SCORE Office at (214) 987-9491.