Important Things to Consider Before Making a Business Acquisition

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Deciding to buy a business is an exciting adventure and a huge financial undertaking. But, when done properly, buying a business can be a great start toward an interesting career and a profitable investment. Before acquiring a new business, it is important to do many, if not all, of the following steps. 

What Kind of Business Interests You? 

Initially it is important to follow your interests and your intuition. You will want to choose a business and/or a product or service that you are passionate about. For example, if you are not interested in the food industry a restaurant or a fast-food franchise might not be your best option. Consider answering the following questions for yourself; 

  1. How many hours a week do you want to dedicate to your business? 
  2. How many employees are you comfortable hiring, supervising and working with? 
  3. Do you prefer to be the only employee or sole owner of the business? 
  4. What are your interests? Do you prefer a service-oriented business such as the restaurant business or do you prefer an item-oriented business? 
  5. What are your “must haves” for your new work environment? This can be things such as flexibility, no weekend hours, early morning-oriented businesses verses late night businesses etc. 
  6. What do you love doing and feel passionate about participating in? 

Once you can identify those aspects of your personal interests and needs, you can narrow down the right type of business for you. 

Do Your Research 

Start researching your options as they pertain to the type of business you have decided to engage in. This includes finding out the following; 

  • What is the economic market for the business you are purchasing? 
  • Who is your target customer base? 
  • Does the established business already have a sufficient customer base to yield enough traffic to your business? 
  • Are there similar businesses out there to the one you are deciding to acquire? 
  • How successful are those similar, or same, businesses? 
  • What will your business mission and model be under your management? 

Once you have chosen the type of business you want to acquire and done some preliminary research, it is time to do some more in-depth due diligence before purchasing the business. 

Due Diligence  

Many people are familiar with the term due diligence, but do not necessarily know what it entails. Due diligence, when done properly, entails at least all the following; 

  • Independently investigating all of the information provided to you from the buyer including, but not limited to; 
  • Are the sales numbers provided by the seller accurate? 
  • Is the documentation being provided by the seller consistent and verified as true? 
  • Does the business have any current legal issues it is engaged in, or any legal claims filed against it? 
  • Are the assets being sold with the business, including any equipment, in good working order? 
  • Obtain and accurate and independent valuation of the business 
  • Employee Considerations 
  • Will any of the employees want to work for you under the new ownership? 
  • Have you been given all the current employee human resource records? 
  • Do you have any concerns regarding which employees you want to keep on the payroll? 
  • Company Debts/Contracts 
  • Does the company have any outstanding debts that you will be asked to take on? 
  • What types of outstanding contracts does the business have? 
  • Will any of the outstanding vendor or service contracts expire or be mandatorily continued because of the sale of the business? 

Professional Assistance 

Seeking professional assistance is necessary. Some of the professionals you will want to consider consulting with prior to purchasing the business include; 

  • Certified accountant 
  • Solicitor who specializes in the sale and transfer of businesses 
  • Current business owners 
  • Business and/or corporate tax specialist 

Once you have taken all these steps, it is time to consider making an offer on the business you are interested in acquiring. This will likely require negotiating the price for the business and other contractual needs and obligations. At this stage, you must engage all the professionals you have come to know and trust during the initial stages of your research and due diligence. 

In the event that you find yourself in need of assistance, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780. 


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