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Copy of Buying an Existing Business
Transcript of Copy of Buying an Existing Business
Buying an Existing Business
Before you roll the dice
When buying an existing business:
Definition of 'Due Diligence - DD'
1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale.
Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a transaction with another party.
investopedia.com MGMT 2224 Company Auction 2012 Jeanelle Brown
DeAntoni Whinstanley Group Members: Today's Lesson Sub-topic:- Buying an Existing Business Buying an Existing Business:
Advance to Go Objectives To highlight the reasons as to why an entrepreneur would want to buy an existing business To explain what steps are to be taken after the purchase of an existing business To outline the step by step process of making the purchase for an existing business To establish the steps to be taken before purchasing an existing business Entrepreneurial Risks Inherit of another company's resources With so many options available to you, the question will become which path of the business ownership arena should you pursue? " " Between franchises, existing businesses, and start-ups, it can become a bit overwhelming. Richard Parker: President of The Business Buyer Resource Center Why buy an Existing Business Hit the ground Running It may be easier for you to get finance as the business will have a proven track record A market for the product or service will have already been developed A reputation to capitalize and build on A Reliable Income Gain a useful network of contacts An established business plan and marketing method Experience and expertise from existing employees The business might be a 'loser' Disadvantages Inherited employees may be unsuitable Honouring/Re-negotiating outstanding contracts ! Decide on the right type of business to buy •Beware of sellers who may have “cooked the books” to make the business more attractive.
•Examine the financial data (tax returns for 3-5 years, over-valued assets, under or over sated assets, unrecorded debts, income underreported)
•Adjust assets valuation to reflect the true state of the business. Before you leap Investigate and evaluate the available business 1. PROPERLY (Due Diligence) 4. Ensure that the business is valued Decide on what type of business you want to buy Find out why the owner is selling 5. Does this business match your personal and financial objectives? What do you expect from this business? What are you willing to risk? How much time can you devote to learning and running the business? Consider the contact source for the business being offered. Is it reliable? You can locate businesses for sale through a broker, industry support agencies, or through service providers. When due diligence is done, you will know just what you are buying and from whom Accounts receivable may be worth less than face value Then So Advantages of buying an Existing Business 1. Advantages of buying an Existing Business 2. 3. Advantages of buying an Existing Business Advantages of buying an Existing Business 5. Advantages of buying an Existing Business cont. Where to look for a business to buy Newspapers Trade Journals Advertisement Magazines Word of Mouth 1. 2. 3. 2. 5. How healthy is the business 3. ? Stock Creditors Debtors Suppliers Assets Licenses Competition Employees ! T he E xisting B usiness S hopping C heck L ist ype of business xpectations Sector trengths ommitment ocation 4. PROPERLY Let's Play The Step by Step Process of
Buying an Existing Business Remember your objectives
(long and short term) usiness Does this piece fit in the puzzle ? 2. 1. 3. Announce it to the world 4. Rally the troops Accountant Lawyer Banker Business Broker The 5 P's of Negotiation Persistence Persuasiveness Patience Poise Preparation Get a team of Professionals together Ask Questions Get Answers YOU MUST Find out: Physical condition of the Business Why the owner is selling Legal Aspects Changes Relationship with Suppliers and Customers 5. Review Financial Statements 6. 7. Dig Deep Lien: Creditors' claims against an asset Bulk Transfer Law Business Seller Business Buyer Protects business creditors Tom Macy Creditor 8. After Buying the Business Employment Tribunal Awards Inform and consult employees Employment Tribunal Awards Inform all Stakeholders that the sale has been completed 7 techniques of negotiation Location 9. Negotiation Change can be difficult to implement 4. Knowledge Is Power
Shop the Deal Be Ready To Walk Away What's Important To The Seller? Start With the End in Mind Determine the Customer Lifetime Value Focus On the Negative
You Don't Need Them!
Use Objective, Third-Party Criteria
True Middle Ground
Know Thy Value and Costs
Do Your Research