Purchasing Existing Business

Buying a business can be very exciting.  Here are some general issues and questions that should be considered:

– Why is this person selling?

– What is the valuation?

– Are the key customers and employees staying?

– What is the nature/type of transaction to be used for this purchase – asset or stock?  Buyers typically want to do an asset sale to reduce their liability while sellers typically want to do a stock sale for favorable tax purposes.

– Will the seller execute a non-compete agreement and for how long?  You don’t want the seller setting up shop next door and provide the same product or service.

– Perform a title search on all assets and a background search and credit report on the seller.

– Who will be/are your competitors?

– Compile financial projections to ensure the business will be profitable and can pay the debt service?

– What type of accounting software do they use?

– What type of internal control systems does the seller currently have in place?

Leave a Reply

Your email address will not be published. Required fields are marked *