Acquiring a business can be long and tiring. Here are five steps you can take to streamline the process and achieve success:
Do Thorough Research
While it is not possible to know everything about a given industry, a few days of research can help you make the right decision. Decide what kind of business you want to buy and conduct thorough research. Learn the trends and opportunities present in the industry. Assess your skills and experiences before making a decision.
There are several avenues to explore business opportunities. This includes word of mouth, newspaper advertisements, real estate brokers, and business suppliers. Business brokers can give you valuable advice so you don’t overpay or make a wrong decision.
Conduct Due Diligence
Once you have identified what business you wish to buy, it is time to put on your detective hat. Due diligence is the process of digging deeper into a company’s operational and legal matters. You should review a company’s:
- Licenses and permits
- Bank records
- Tax records
- Physical assets
- Yearly earning
- Employee files
- Lease and purchase agreements
- Major contracts and investments
You should review a company’s legal history such as past lawsuits. This will limit your liability and prevent any unexpected costs.
Hire a Business Lawyer
The process of buying a business comes with a variety of risks and challenges. A business lawyer can support and streamline the process. They have in-depth knowledge and extensive experience in various industries. Here’s how buying a business lawyer can help you:
- They can offer advice on how to conduct the transaction. Whether you should buy the business outright or its assets, a business lawyer will guide you.
- Buying business lawyers can take care of the due diligence process. They will review all legal and financial documents.
- A business lawyer can mitigate risks.
- They can manage all negotiations and help you get your ideal price.
- Business lawyers will ensure all transactions meet legal standards.
- They can draft the letter of intent and the purchase agreement.
Obtain All Approvals
In every business, there are multiple individuals involved. Consent and approval from all parties are necessary during a major transaction. You should get consent from the company’s suppliers, stockholders, investors, board of directors, and creditors. Without proper consent, you may be exposing yourself to lawsuits and other penalties. It can even lead to the termination or nullification of your contract. If the business has an ongoing contract with a manufacturer, obtaining consent from all the parties involved is necessary.
Secure Financing
Once you have negotiated your business agreement, determine who you are going to finance the purchase. Entrepreneurs adopt the following methods:
Self-Funding: Have you been saving up to buy a business? Tap into your savings account and determine if your funds can cover the purchase.
Small Business Administration Loan: You can take out a small business administration (SBA) loan to buy a business. These are backed by the federal government and can be helpful for young entrepreneurs.
Partnership: Are you running short on funds but don’t want to take out a loan? A business partner can solve the issue. Silent partners and venture capitalists are common options.
