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Buy or Sell a Business

Buying or Selling a Business

Buying or selling a business is not something to be taken lightly. Buying an existing business is often a simpler and safer alternative than the work it takes to start a business and do the business plan, market research and financial analysis required. However, when buying a business similar due diligence is recommended as you research the business, analyze the financial statements and look at the customers and market. The main advantage in buying an existing business is the savings in startup costs of time, money, and energy. In addition, cash flow may start immediately thanks to existing inventory and receivables. Other benefits include preexisting customer goodwill and easier financing opportunities, if the business has a positive track record. The biggest obstacle to buying a small business outright is the initial purchasing cost. As the business concept, customer base, brands, and other fundamental work have already been done, the financial costs of acquiring an existing business is usually greater then starting one from nothing.

Selling a Business

Selling or any form of exiting a business may take weeks and months to be completed. Leaving your business requires as much planning as starting the business. Begin to plan now for how you will exit the business. Thoughtful succession planning is important for all businesses, particularly family-owned businesses. Working with an accountant and an attorney will help you understand the tax consequences of the transfer and develop a succession plan that will work best for your situation.

Sales Agreement

The sales agreement is the key document whether buying or selling the business assets or stock of a corporation. Make sure the agreement is accurate and contains all the terms of the purchase. It is recommended that an attorney review this document. It is the sales agreement that defines everything that will be purchased with the business including assets, customer lists, intellectual property, and goodwill.

Determining the Value of a Business

A realistic business valuation requires more than merely looking at last year’s financial statement; it requires a thorough analysis of several years of the business operation and an opinion about the future outlook of the industry, the economy, and how the subject company will compete. Helpful Links on the SBA website include: https://www.sba.gov/tools/sba-learning-center/training/buying-business https://www.sba.gov/content/selling-your-business  

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