don't overpay when you buy a business

Don’t Overpay When You Buy a Business

If you are in the market to purchase an existing business, you need to examine the company carefully to ensure that you don’t overpay when you buy a business.

Don’t Overpay When You Buy a Business

accountant-1238598_640If you are currently in the market to buy an existing business here in Dallas (or anywhere for that matter), you need to examine the company carefully to ensure that you don’t overpay when you buy that business. After you line up a company in your sights, investigating it thoroughly can pay off in many ways. For starters, your due diligence can help you negotiate on the price. It’s not unusual for a professional business broker to find issues that can significantly reduce the initial asking price.

For instance, recently Elan was looking over a business for a client. When we looked closely at the P&L statements, some numbers did not match with the submitted financial cash flow statements on the pending sale. This resulted in a renegotiation on the purchase price saving 6 figures for our client.

This broker “advance work” will also help protect you from expensive predicaments that only arise after the company becomes your responsibility. If you are looking to buy a company, you will be better positioned if you follow some sound fundamentals.

Investigate

look at the books - don't overpay when buying a businessWhat “human” assets are included in the sale? The management team and workers? Does the current owner make all of the important decisions, leaving you to step into a management vacuum when you take over? Or will you be inheriting a management team that’s trained and able to help you carry the load? Are key key employees tied to the current owner or to the business (and you)? People are usually the most important assets of any company, and great care should be taken on how best to retain the key employees. Also don’t forget vendor and customer agreements that are currently in place.

Then there are the fixed assets. The company may not have an accurate, up-to-date list of its fixed assets. Be sure that the resources you think you’re getting actually exist and are in good working order, including IT hardware, software, websites and current social media channels. All too often, new owners find themselves locked out of the business digital world after taking over.

Evaluate

Elan- financing mistakes new business owners makeClearly, you will want to know how much income the company is pulling in against the fixed costs. But you also need to find out how it’s coming up with its numbers by performing a quality of earnings review. Could some of its achievement come from accounting choices that don’t stand up to closer scrutiny, like in the case above? Is its outstanding performance due to forces outside its control that might change dramatically after you buy the business?

Don’t Overpay When You Buy a Business

It’s relatively easy to overpay when buying a business. Don’t overpay. And don’t rely on attorneys and accounting firms. Call in real help.

Call in Help

buying a business in DallasDon’t get caught by surprise. The professional business brokers at Elan Capital are here to help. It’s not just about making sure you pay fair-market value. There is much more Elan Capital provides their clients, but our negotiating skills are unequaled.

888.615.1418

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