Buying a Business For Sale in the Real World

Buying an existing business for sale can be seen as a leap into the dark and many enterprising individuals think twice before proceeding. Those who have never been involved in this kind of dealing before can be very challenged by the process. It is, after all, not like buying a house or a vehicle where we can see a tangible product and “what you see is what you get.” Business valuations can be composed of so many different intangible aspects and when goodwill comes into the equation, this is additionally difficult. Remember that in a service related business, such goodwill and especially a strong client list can be critical, although when conducting due diligence many other areas or documents must be explored.Always remember that there are two different viewpoints here. The seller will have a clear indication of the worth that he or she places on the business. This may often be inflated by a natural enthusiasm and the sheer amount of hard work and dedication that may have been put into the business to this point. While you should always maintain an element of respect for the seller’s point of view, you must look at all documentation and evidence in the hard light of day and understand that it is up to you to determine if you should buy business interests according to the specific value for you alone.When you decide that you want to move forward and investigate whether to buy a business of interest, understand that this may be a lengthy process. During the entire process you must maintain a level of common sense and good humor and be prepared to cultivate a strong level of communication with the seller.It is highly recommended that you bring in expert advisers and utilize proven resources, especially if you have no real experience of running a business in this line, or niche. Don’t think that you can just hand off all the documentation and essentially the decision-making to these people, however, as the decision must be made, in the end, by you! Be prepared to review all documentation and financials yourself first and be sure that you get a reasonable feeling about them all before handing them off for further processing.Always be wary if some of the financial documents are either missing or incomplete, or are not balanced and reconciled correctly. Certain precedents must be maintained and accounting procedures completed. You may be asked to sign some nondisclosure or noncompete documents before these are made available, but the financials are the rock upon which everything else is built.No two businesses are alike and every operation is dynamic in its own right. So many external influences are involved and any number of different events can come to bear to create a variety of different situations. Expect to uncover some unusual facts and figures or surprises and remember that, while industry benchmarks are interesting, a lot of the information you discover here will be a function of real-world activities.

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