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Thread: Thinking of buying a business

  1. #1

    Default Thinking of buying a business

    I have recently identified a business I want to purchase, already spoken to the broker, signed the NDA and are in discussion. My question is do I need to find my own broker? I have never bought a business before and feel like I will need some help along the way

    Thanks,

    David

  2. #2

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    If you do it right you don't need to pay for another middle man. For example make sure they give you temporary access to inventories, billing, and etc to audit everything for yourself. If they won't do this for you I would find another seller to buy from.

  3. #3
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    Yes, you need help!!! A lawyer and an accountant! I don't know the complexity of the business you are buying, or price. But, there can be a lot of subterfuge including hidden liabilities, over stated revenue, unpaid taxes, payables, employee issues, leases, liens etc. Again, we don't know what the business is but the bigger and more complex, the more you need help.

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    Listen to that feeling. Like Paul said, find a lawyer and accountant who are familiar with business purchases.

    One piece of advice I'll give now:

    Do not accept sales, profit, and expense numbers from the seller that cannot be verified in the tax documents.
    Brad Miedema
    Fulcrum Saw & Tool

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    LAWYER. If you can afford to purchase an entire company you can afford an attorney.

  6. #6

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    Quote Originally Posted by Fulcrum View Post
    Listen to that feeling. Like Paul said, find a lawyer and accountant who are familiar with business purchases.

    One piece of advice I'll give now:

    Do not accept sales, profit, and expense numbers from the seller that cannot be verified in the tax documents.
    That is why you ask for temporary access to the live environment(s). Hosting companies ALWAYS ask for this and if they don't get it they move on the next seller.

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    Quote Originally Posted by HumaneHosting View Post
    That is why you ask for temporary access to the live environment(s). Hosting companies ALWAYS ask for this and if they don't get it they move on the next seller.
    It's not a question of access. It's a question of legal and financial verification. A seller can easily make everything appear in good shape, while completely misrepresenting reality. There can be all kinds of hidden problems.

    Also, you can't just dismiss opportunities at a whim. It's not so easy finding the "next seller". Even if the seller is a little difficult or cantankerous it may still be a great opportunity. Just work through it with professional help.

  8. #8

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    Quote Originally Posted by Paul View Post
    It's not a question of access. It's a question of legal and financial verification. A seller can easily make everything appear in good shape, while completely misrepresenting reality. There can be all kinds of hidden problems.

    Also, you can't just dismiss opportunities at a whim. It's not so easy finding the "next seller". Even if the seller is a little difficult or cantankerous it may still be a great opportunity. Just work through it with professional help.
    Absolutely I can understand that part but still lawyers and such charge you by the millisecond... So with that said you want to do as much as possible from your end then just have them do the "double check" to validate your findings. If it similar then move forward, but if it still questionable then either pay these people more for a deeper inspection or find a new seller.

    Finally I has to disagree with the thoughts of sticking with a "bad" seller. If the seller seems not a good person and such I would personally find a easier one to work with. Unless your trying to buy a business that failing that you looking to flip or something at a steep discount it may be worth "wrestling" it over.

    But if I am not going to be CERTAIN that I am going to "win the battle" I am leaving the "ring" before the "battle even begin".

  9. #9
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    Well, it depends on what the business is. Any kind of traditional business needs verifications, not to mention a fairly negotiated sales contract. You usually need a lawyer for that, again depending on the business. Business with typical accounts and inventory etc really do need to be properly verified.

    A cute "ring" analogy , but if you don't get in the ring how do you know you can't win? You shouldn't be intimidated out of a good opportunity. You're not buying the seller, you're buying the business. Its not about finding an easy seller, its about finding the right business. If you feel they are dishonest, that's even more reason for lawyers and accountants.

    The poster apparently has found a suitable business to buy. I assume he did some preliminary due diligence. As a first timer he just wanted to know if he needed help. A smart question. The answer is he does. Suggesting that he doesn't is not sound advice, in my opinion. As a first timer he probably doesn't know what to look for. That's why he asked.

  10. #10

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    Quote Originally Posted by Paul View Post
    If you feel they are dishonest, that's even more reason for lawyers and accountants.
    So what your suggesting that you spill even more money down the drain??

    I don't know about you but I rather let's a honest seller tell me upfront the details rather than me PAYING for someone to get that for me.

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