When buying a small business. Top 10 things to do
Small businesses are a major part of the economy and operating one gives you the chance to be part of the bigger picture. Some individuals are simply the creative forces while others are the entrepreneurs with the knack to build and grow businesses. If you are gifted with the skill to handle the latter, buying a small business and taking it to greater heights is therefore an angle you have thought of. Here are the top 10 thigs to do when buying a small business.
Find an attorney
Your interests will be best served with an acquisitions attorney by your side to ensure everything runs smoothly. The role of the attorney will be to check the documents, stipulations and asset arrangement including pre-screening the business for you to ensure everything is in order. An attorney is also charged with pinpointing areas where negotiations will be needed including setting terms for the transaction. Competent attorneys like runrex.com can aid you in the process to ensure smooth sailing.
Perform due diligence
It is imperative that you are the right fit for the business. You should have the vision and capacity to create a future plan for the business and thereby grow it to the desired heights. A small business may look appealing but without the right expertise and governed approach, it may end up being a bad investment. It is therefore crucial that you perform due diligence to understand the in-depth details of the business.
Get a business valuation firm
Nothing is as important as having valuation of the business done to give you a clear picture of what you are buying. The worth of the business is the most important factor to note since it determines the value you will be acquiring. It is especially crucial that you consider how expertise and connections impact the value of the business and what you will be left with when the immediate owner exits.
Review sales records
Check the sales records for the past years up to the fifth year and identify the trend and performance. Agencies like ppchire.com are instrumental when it comes to analyzing the details and comparing the performance to the industry threshold to identify the patterns. This is what allows you to find out how you can better the setting. It is important to check on learned patterns since they will enhance your understanding of the inner workings of the business.
Check out the sales and payroll taxes
You must get a clearance certificate stating that the seller is current with the sales and use taxes. Payroll and other business taxes owed can give you a headache down the road so it is crucial to clear that before signing on the dotted line. During this process, it is imperative that you have an accounting firm evaluate the written financials to understand the position of the business.
Identify seller-customer ties
Always check whether the seller of the business has agreements and ties with a section of the customers. You have to be proactive in researching whether there are specific deals that will impact the business when the seller exits the business.
Consult on the lease
If the small business is being run on leased premises, it is important to consult and find out if you will be given the chance to assume the lease “As is”. Many neglect this stage of the acquisition process and always end up with massive fees to shoulder just to regularize the lease. You have to also check on security deposits and identify how they factor in the total valuation of the business.
Check on contracts and legal obligations
Always make sure you have reviewed the sales and purchase contracts, employee agreements and any legal obligations and stipulations. All these have to be brought to the fore when you are trying to buy a small business since they become part of your operational tasks. The goal here is to carefully analyze the documents to ensure there are no ambiguities that can impact you negatively in future.
Identify the Insurance situation
The goal here is to check if the business is insured properly including identifying the type of insurance, what it covers and the obligations you have towards the same. Qualified firms like bitgale.com can help you through the process and ensure you get all the factors right.
Have a sales agreement
When the terms of the sale and the funding have been captured, you have to make sure you draft a sales agreement that will authorize and rubberstamp the purchase. An acquisitions attorney plays a crucial role in this step since they stand as the experienced head that will draft and capture all the necessary details to give you ownership of the business.