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5 Steps to Buy a Company: A Guide

by Michael McDonald
December 10, 2021
in Business
0
5 Steps to Buy a Company: A Guide

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Do you want to buy a company? Over 30 million small businesses exist across the United States. Starting from scratch is an enormous task. After all, most industries are teeming with more established enterprises.

As such, it is better to buy an existing business instead. It allows you to get an audience without spending months or years of promotion.

However, you might have no idea how to buy a company. If you are not careful enough, you will end up paying more than you should.

Fortunately, our guide can help. Read on and learn about the steps on how to buy a business. Use these to make the most out of your investment today.

1. Decide Whether to Buy Assets or Stocks

Determine if you are buying business assets or stocks. After all, your answer will determine how to proceed with the documentation. Here are some examples of business assets:

  • Equipment
  • Intellectual property
  • Product inventory

Most buyers prefer buying assets. When you choose this path, you will find how easier it is to perform your due diligence. Also, you will never assume the previous owner’s liabilities and debts.

2. Consider the Purchase Details

Ensure you know everything included in your business purchase. When you have detailed inventories, the business value is less ambiguous. 

While negotiating, use a Letter of Intent to help. It is often non-binding while allowing you and your seller to stay on the same page. With this, you can make informed decisions before drawing the formal agreement.

3. Do Your Research

Search for online resources to determine the business’s current reputation. Consider looking into the Better Business Bureau and other public information outlets. Do it before putting anything into writing.

After drawing the general agreement, ensure the contract must outline your right to a due diligence duration. It will allow you to inspect various company information, such as:

  • Books
  • Finances
  • Contracts
  • Properties
  • Inventories

In this period, look for required approvals from various third parties. Leases, licenses, and permits often require these. For a better experience, think about hiring a manufacturing broker.

4. Inspect Your Future Team

Your new company’s survival depends on your employees. Check whether the existing workers remain after the ownership transfer concludes. If they are, draft new contracts to ensure these people are comfortable with you as the new business owner.

Are you planning to move in a different direction? Consider giving reasonable notice to let employees plan how they will transition. It also gives them more time to decide whether to stay or resign.

5. Get Legal Representation

Never rely on sample legal agreements you can find online. Get a good lawyer to help craft a purchase and sale agreement. It limits your risks and liability after assuming business ownership.

A general template will never cover some specifics. Collaborate with the lawyer to ensure meticulous documentation and maximize your success.

Buy a Company Now

These are the steps to buy a company. Use these to ensure your success when buying a business. After all, it allows you to get a reputable enterprise with no hidden debts.

Did you find this guide helpful? If so, consider reading our other posts today.

Michael McDonald
Michael McDonald
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