Get Smart – What to Ask For and What You Must Investigate When Buying a Business For Sale

Buying any business is a huge commitment, let alone a calculated gamble. Ensuring your gamble is a safe bet however is the toughest part of your journey in selecting a business for sale. To ensure you protect yourself from making the biggest financial mistake your life, take some measured steps to get as much insight into any business you are considering buying.The due diligence stage is where the seller is expected to lay all their cards on the table, effectively opening up their business for your scrutiny. If you’ve reached this stage, you must be serious about making an offer. But before you dive in head first, consider some important factors that you need to investigate.The seller should at this point ask you to sign an “Non-Disclosure Agreement” to protect the integrity and value of their business. This is perfectly normal practice and it would go without saying that you shouldn’t object to agreeing to this, unless the terms of the contract are questionable. Any seller who doesn’t ask you to maintain confidentiality by means of an agreement may be deemed to be slightly reckless or naive. if this is the case, you may need to question to professional experience of the seller. This may work in your favour, however it may also reveal the working practices of the firm. In my experience, without an agreement of this kind I would feel as though the negotiation process is far too informal and the seller may be unprepared for what is about to occur. Only time will tell.Whether the business is a small family set up or a long established, highly profitable organisation, I would always expect certain documents, facts and figures to be readily available by the seller. Naturally as a buyer, your first inclination is whether this business will give you a good return. Everything else is in the detail.So to expect to have sight of the company accounts, details of profits and loss, assets and liabilities is a given. Any resistance to this by the seller should be treated with a certain level of suspicion. If they are expecting you to part with a sizeable amount of your money, the least they can do is give the facts and give it to you straight. If you suspect foul play, simply walk away.To avoid disappointment and more importantly wasting your precious time, sending a list of required items to the seller in preparation for any upcoming meetings or discussions can be a good idea. It means that you have given the seller ample time to prepare up any documentation before you head off to that all important face-to-face meeting. It will also allow you to gauge the reaction of the seller. If they are willing to prepare up the usual list of documents you need to oversee the financial health of the business, then clearly you are off to a good start.Each and every business is different however, what you need to ascertain clearly is what drives the true value of the business. It could be the workforce, the client base, ongoing contracts, a unique product or service or simply the strong goodwill value through years of trade. Whatever that key factor is, you need to weigh up its real value through knowledge. Knowledge that is only gained through the seller. If you can get sight of information such as contracts, or sales figures or commitments from buyers, all the better.Expect some resistance at this point because remember, any seller has to protect the integrity and value of their business so to ensure you are not disappointed at this key stage, let the seller know you are serious and you will fully respect any confidential information you are privy to. Trust is the key here. If you can work together amicably and professionally with the seller, you will both end up with the deal you want. Any pushiness, aggressive negotiation or unprofessional behaviour will just leave you empty handed and serious disappointed.There is no definitive set of right or wrong questions to ask in these situations but essentially what you need to get is a good understanding going with the seller. If you feel a sense of honesty and integrity about the way they operate, it could be a good deal to work towards.Good luck with your purchase.

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