To ensure the success of the business that you are planning to acquire, here are the steps to take: - Ganna Magazine Blog

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To ensure the success of the business that you are planning to acquire, here are the steps to take:

  • Research
Get to know the strengths, weaknesses, and other necessary details about your target business.  Here’s a checklist of the important things to know about the business:

  • Marketing plans and costs
Know which strategies worked and not worked for the business. Is there a need to target a specific channel or market to generate more profit? How much was spend to effectively advertise your products and services?
  • Financial records
Seek the help of an accountant when scrutinizing the financials of the business up to the last five years.

  • Existing contracts and lease agreements, if there are any
All contracts, employee agreements, purchase agreements, and other legal forms must be properly documented and provided to you by the seller.

  • Sales records
It’s also advisable to secure records of sales to give you a better understanding of the performance of the company. It’s good to compare the posted numbers to that of the industry and also see which accounts are performing well within the past two years. This will help you in making sound decisions to improve the performance of the business.

  • Outstanding debts and liabilities, if there are any
Were there any lawsuits filed against the company? Are there any existing liens? It’s good to tap an attorney and an accountant when examining this.

  • Business reputation
Know how the market perceives the business. If for example the business is based in Toronto, talk to the customers in the area and get details on what they know about the business. A negative image might be indicative to not push through with the sale.

  • Database of clients and suppliers
It’s also good to know if the seller has established good ties with the customers. Is there a guarantee that the customers patronize the products and services that you offer even after the ownership transition?

Make sure to also know the suppliers that the company is transacting with so you won’t have a hard time procuring the needed materials for the operations.

  • Customer patterns
  • Location and market area
One of the key factors to the business’s success is the location. If you’re targeting a certain location, say Toronto, take some time to assess the area and observe the people/shoppers so you will know if it’s good to make that decision to purchase a business in that area.

  • List of employees, their corresponding salary amount and the tenure in the company/ organization chart
Get to know the people that you will be working with and the certain tasks that they are responsible of, apart from the other employee data that you need to know.

  • List of equipment and other existing assets
Be aware of the assets that will be inclusive of the sale. Work with the accountant to also verify if the set value estimate for each is reasonable.

You can compare the documents handed to you with government databases to verify if there are no unpaid taxes, existing liens, or human rights (employees) violations.

  • Determine the structure of the purchase

Know what will exactly are you planning to buy. You may either buy the assets or shares of the company. The asset type of purchase gives you a clearer view of the assets and the liabilities that you will absorb once you make the purchase. You will also have a free hand in managing the assets and the employees for the operations. But this might be more costly as compared to buying shares of the company.

Set the price that will be paid for the business and how will that be given to the business seller. By the time you decide to buy a business, the inventory, accounts receivable, and profits will undergo several changes since the business is actively operating. The agreed price may be paid in installments, depending on the agreed terms with the buyer.

  • Set an agreement for the other terms

Apart from settling the price to be paid for the business, you may also have to discuss with the seller other terms like the existing staff. Discuss with the seller how you plan to manage the existing employees to assess how these people will greatly influence the operations once the ownership is turned over to you.

You must also have an agreement with the seller that he/she must not set up a business that will compete with the one you’ve purchased. This can be put into writing through a Non-Competition Agreement.

  • Prepare the necessary legal documents

The buyer should be the one prepare the legal documents such as Letter of Intent and Purchase Agreement. The Letter of Intent must reflect the initial and basic aspects of the sale. This document will help avoid any misunderstanding or renegotiations of any key terms when the sale date is already fast approaching. The Purchase Agreement is the main document needed for the transaction. This document must contain all the critical details that were agreed by both the buyer and the seller. Included are the “representations and warranties” of the seller. This will make the seller accountable for every detail disclosed and ensure you that you are getting what you actually paid for. Description of all the assets and liabilities included in the acquisition may also be found in this document.

  • Other tips
  • Keep your focus on a certain thing at a time. After you make the sale, you should prepare a list of the factors and concerns that should be prioritized based on your several discussions with the seller and on your own research.
  • Tap the right professionals who will serve as your advisors. Experts in this field will be very much of great help as you go through with the transaction. They will surely give you sound advice when it comes to legalities, financials, and costings.
  • It’s okay to walk away. If you’re not being given with the necessary details you need to push through with the acquisition, you have all the right to not risk your money and time for it.
To get more tips on buying existing business, visit the website Toronto Business sale.
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