Tips for buy­ing a busi­ness

Kapi-Mana News - - OPINION/NEWS -

Buy­ing a busi­ness is a big step and can be a huge risk, un­less you do your homework. Here are some steps you can take to max­imise your chances of busi­ness suc­cess. The value of a busi­ness of­ten de­pends on the as­sets be­ing bought. Make sure you know what the as­sets of the busi­ness are and how much they are worth.

When you con­sider the as­sets, re­mem­ber to look at some of the less ob­vi­ous as­sets like cus­tomer data­bases, op­er­at­ing man­u­als, trade­marks and de­signs.

Make sure that you are buy­ing those suc­cess­ful sys­tems and in­tel­lec­tual prop­erty of the busi­ness as well as other as­sets, like any ma­chin­ery, stock and of­fice equip­ment.

Nat­u­rally the seller wants to make the busi­ness sound as good as pos­si­ble, so it’s a good idea to make your own in­quiries and dig deeper to sat­isfy your­self that what you are hop­ing to buy is up to the mark. For ex­am­ple, we rec­om­mend that you:

Try to get ac­cess to the key cus­tomers and sup­pli­ers to find out what their views are about the busi­ness, and their plans.

Check what the terms of ex­ist­ing con­tracts are and find out what con­tracts will be signed over to you and what con­tracts you might have to rene­go­ti­ate.

Try to find out about the com­peti­tors. How do the busi­ness’s sales and prices mea­sure up to the com­pe­ti­tion?

Are the as­sets of the busi­ness legally owned by the ven­dors? Are there any pending legal dis­putes? Are the con­tracts in or­der? What li­a­bil­i­ties could the busi­ness face?

Re­mem­ber to work with your ac­coun­tant, too – they will be able to pro­vide ad­vice on the fi­nan­cial po­si­tion of the busi­ness and its long-term viability.

You can in­clude a due dili­gence con­di­tion in the agree­ment for sale and pur­chase if the seller agrees.

Em­ploy­ees are key to the suc­cess of a busi­ness. Will you take on all or some of the ex­ist­ing em­ploy­ees, and if so, on what terms?

Ne­go­ti­at­ing to talk to key em­ploy­ees about their plans makes sense.

The agree­ment for sale and pur­chase needs to set out whether you are go­ing to be re­spon­si­ble for out­stand­ing leave en­ti­tle­ments of em­ploy­ees and, if so, how that will be dealt with on set­tle­ment.

Some em­ploy­ees, such as cater­ing and clean­ing, are pro­tected if a busi­ness is sold and have the right to trans­fer to the new owner.

That right extends to a new em­ployer who takes over ex­ist­ing con­tracts, so set­ting up a new en­tity does not get around this re­quire­ment.

If the busi­ness premises are leased, check the terms of the lease, in­clud­ing the rent, how long is left on the lease and whether there are any re­main­ing rights of re­newal.

While you might feel rushed to sign up to a busi­ness pur­chase, it is best to get ad­vice be­fore do­ing so.

Many of the clauses you in­clude in your sale and pur­chase agree­ment, (such as a re­straint of trade clause) can be vi­tal to how well your busi­ness goes.

There is much to think about when buy­ing a busi­ness.

Ex­pert ad­vice will go a long way to­wards help­ing you buy wisely and min­imise any nasty sur­prises.

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