Important Things to Consider Before Buying a Business

Buying a business is an empowering step to take. It’s exciting, exhilarating, and a little scary all at once. If you’re considering such a major step in your financial life, there are probably a few things you’ve already thought through. However, here are a few more important things to consider before buying a business. You can find out more about what kinds of due diligence to do, and the sorts of questions to ask from experts in this area, of whom GlobalX is just one.

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Are You Buying The Assets Too?

This is an important detail to get right from the outset. Some businesses have very little in the way of assets and inventory. Services businesses for example, mostly have cash at bank, incoming monies, and clients as their assets. With a more tangible business offering like, say, a cafe or hairdresser, the business will have assets in the shape and form of shop fittings, stocks of coffee or shampoos; they may even have deals with suppliers and promoters that can be considered assets. In addition to this, they may have vehicles that go with the business. When purchasing a business, make sure you don’t just end up with an empty shop with no signage and no client list – unless of course, that is what you knew you were getting. A good business lawyer and accountant can help you get this right, but make sure you are very clear about what you’re paying for.

Cashflow

The details of your sales contract should also stipulate what happens with accounts receivable and payable. Incoming monies may be for work done before you owned the business – so how will that be handled? Likewise, any bills that come in might be for materials that are already partly used by the vendor, so how will you handle this? Fees and charges for owning and running a business are often annual or quarterly – will these be dealt with in a pro rata manner and added to your purchase price? Will they be waived? Consider how many cars are sold ‘with four months’ registration still to run’ – it’s the same sort of thing really. It doesn’t matter how these details are worked out, as long as they are worked through, and as long as you are clear about the result – and as long as everything agreed to verbally is also in the contracts.

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Handover

Will the vendor be sticking around for a while after the sale? This is a good idea. If nothing else, they can introduce you to clients and suppliers, but it’s especially important in case anything unforeseen turns up, like a lawsuit for something that happened years ago. Even with the tightest forensic book checking you can imagine, some issues still seem to creep in to the day to day running of any new business – well, it’ll be new to you. You can ensure any arrangement like this is written into your sales contract.

There are a lot of important things to consider before buying a business, and it’s as well to have your wits about you. The most important thing to remember is to get clear on all the details – and to get any agreements in writing. If you manage that, you’ll be doing well, and ensure your team of legal and financial experts are across all agreements.

What things would you consider important before buying a business? Share your insights in the comments box below.


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