Buy and Sell an Existing Business
The buying and selling of business go through meaningful phases. The dealing of the phases by each person is different. The focus of the buyer and the seller is different. The buyer and the seller both should be psyched-up for every phase to gain advantageously in the procedure.
- Readiness in business for sale-for the buyer, this aspect is not self-evident as this is the first time, he will review the business. He will target meeting mergers, and acquisition, coming face to face with other business owners in the field. The seller will focus on the conditions that cropped up and caused weakness to business and will lead to value downsizing. A planning time will be needed to upgrade the vulnerability so a good price for the business is gained.
- Purchaser list- the buyer is required to develop the investment yardstick and the business mergers and acquisition advisors will ponder over it. The protocol will be based on revenue, gain before interest, taxes, depreciation as well as amortization. The industry and location are also important. As regards the seller the investment banker works on the potential buyer list for the company. The seller is also required to contemplate from among the list the best for the company. This includes competitors, clients, vendors, and other allied companies.
- Letter of intent-this is the commencing agreement between the buyer and the seller. The letter projects circumstances of the transaction and are mostly not confining. The buyers' approach is general which has a certain amount of flexibility to again mediate the purchase agreement in case unfavourable information is discovered in the period of diligence phase. The seller's fixation is to discard any of the buyer's vague communication or terminology that are open to misinterpretation. Transparency in terms and conditions curtail disagreements and renegotiation and purchase agreement is prepared with ease. The bargaining deviates from seller to buyer once the letter of intent is signed.
- Prerequisite persistence- This period is the buyer's opportunity to authenticate the information given by the seller. This period is however time-bound in most cases not exceeding 90 days. Thus, the buyer is required to act fast after the letter of intent is once signed. The verification is to check hidden weak design in the contract or business. This is followed by the final phase.
- Concluding of the transaction-the buyers is required to comprehend fully the meaning of the terms and condition in the purchase agreement. He should know how purchase price is worked out. The seller focus should highlight the adjustment period for life without the business.
Purchasing an existing business is less uncertain compared to beginning from a scratch. The seller should purchase business, which is profit-generating, an established customer base, a name in the market, and manpower well-versed in the art of business. The seller has already established the procedures, systems, and policies. The buyer need not reinvent the wheel.
