Buying a business is a serious step that requires extensive preparations. Even if the deal seems magically beneficial, it shouldn’t be grabbed immediately.
Business brokers have all the information you need to make the right decision. However, they may not reveal it unless you ask the right questions.
Below, we are listing the top 10 issues you must discuss with the broker in order to avoid unfortunate consequences, botched deadlines, and disappointments.
#1. Financial Records
The financial records of a business are highly important for its future operation. Meanwhile, financial problems are commonly hidden. If you don’t ask, you’ll never find out. So when speaking with the broker, request the following for review:
- Accounts for last two financial years
- BAS (Business Activity Statements) for the last four quarters
- Last income tax return
While studying the information, ask for a list of every asset included in the sale. According to Orlando business broker Cress V. Diglio, it makes sense to hire a finance expert to find hidden problems if any.
#2. Existing Employees
Depending on the type of business, you may want to retain the existing employees. Did the seller already give them notice? Generally, if you are only buying assets, you don’t get to keep the employees. However, this point is always negotiable.
If employees have been working with delicate information, make sure they sign non-disclosure agreements before leaving.
#3. Trial Period
During the trial period, you can see how the business is working and whether it makes the minimum sales of no less than the average turnover mentioned in the financial reports. Which trial period does the seller offer? It shouldn’t be less than seven days.
#4. Stakeholder Information
You can get the most detailed information from the employees, suppliers, vendors, and customers of the business you are about to buy. Ask the broker for their details to have an opportunity to speak to these people and get all the necessary information.
#5. Permits and Licenses
In order to function properly, some businesses require certain permits or licenses. Ask the broker if any are necessary. However, you should also check for these matters yourself as well.
If any permits and licenses are required, ask the broker to present them to you before closing the deal. Make sure they are in good standing and are subject to transfer to the new owner.
#6. Handover Period
Since the owner has certain relationships with suppliers, partners, and clients, it’s important to set up a handover period. During that period, the owner can introduce you to these people and ensure a smooth transfer. Discuss the handover period with the broker. Is the owner willing to arrange one?
#7. Non-Competition Clause
Why is the business owner selling the business? Perhaps they are planning to open a similar one and take all the existing customers with them. Ask the broker if the seller is willing to sign a non-competition clause, which states that they aren’t planning to open a rival company.
When speaking with the broker, you can ask for details about the business’ competition. This information can be vital for your business plan. Ask for the advantages the business has over the competition as well as what has been done to get ahead of it.
#9. Price Negotiations
Sometimes, all it takes is to ask how much the seller is willing to lower the price. Price negotiations are highly delicate, but making a bold move can pay off. Perhaps you won’t need to go through the tough negotiation rounds if the broker reveals enough information when answering your questions.
Many business owners are reluctant to give out information until you make an offer. Discuss making a reasonable offer with the broker in order to get the data. You can always withdraw the offer if something doesn’t satisfy you.
Even though business brokers mostly work with sellers, they can also help buy a business. With the right approach, they can simplify the buying process and help you get the best deal.