14th August 2017
You might be ready to invest in a business, or it may be time to make that exit strategy a reality. Buying or selling, there are things you should consider to help you make the process as smooth as possible.
Getting into, or coming out of a business is a big deal. Investors need to have access to funds, a really good understanding of the sort of business they want to buy and why, and a plan for the future.
Sellers need to know that this is the time when they will get the best price for the business, and understand what needs to be done in order to get the business in a position to be an attractive option to buyers.
Just like buying or selling a house, you need to be sure you’re aware of all the positives and all the potential pitfalls before you sign on the dotted line. That’s when you’ll need some professional advice – at the very least, an accountant and a solicitor who specialise in business transactions.
They will help you to ensure that you have followed the right processes, asked the right questions, carried out the right valuations and due diligence, queried anything that you’re unsure about and are confident about the decision you’re going to make. They will also make you aware of additional costs that you may incur.
A business valuation takes a number of considerations into account, including whether premises are leased or owned, the value of any assets included in the sale, such as stock and machinery, and the overall profitability of the business. There are many other factors involved in a valuation and as either a seller or a buyer, you should take the time to understand what’s involved so that you can make an informed decision. If you are unsure, talk to us.
Buyers will need to secure the funds to buy. Unless you have a substantial cash sum to invest, this will usually mean getting investment from elsewhere. This might be from your bank, a venture capitalist, a syndicate of investors or finding a partner who will invest with you.
Whichever option is right for you, you should make sure that you are fully aware of any financial agreements you enter into in order to acquire the funds you need – and that you understand the purchase details for the business you’re buying.
Sellers clearly don’t need to arrange funds, but they do need to know how the buyer is paying. Will you retain some shareholding interest? Will the payment come at agreed intervals to allow a hand-over, or will you receive the total amount in one go? Structured financial agreements are incredibly helpful to business owners selling a going concern.
To find out more about getting helpful, professional advice on business sales and acquisitions, contact us today.