It’s extremely important to exercise due diligence before buying a well-established business. Before making a move on another company, read the following tips:
Assemble the best team
Almost every company has these three divisions: finance, sales and marketing and operations. So, it makes sense to pull together a pool of experts that represent these areas of expertise. Depending on your unique situation, you may need to bring in external help in the form of legal counsel, valuation experts, investment bankers and accountants.
It is extremely important that the people who make up this team be able to work together; this is neither the place nor the time for maverick thinking. Everyone’s eyes must be on the same objective, and these experts must think cohesively and communicate constantly.
They must also be willing to carry out their respective responsibilities within the limits of their authority as defined by the CEO or someone appointed by that person. Source: Entrepreneur
Determine the right price
No one valuation method will answer the real question which is what is this business actually worth? Value is in the eye of the beholder. Generally speaking, market value is one indicator. Other price factors are capitalization of earnings, discounted cash flow, and net return of assets or equity. But you also want to consider strategic value, meaning, what is the projected earnings stream under the proposed new ownership. Look at assets such as customer lists, brands, intellectual property, and licenses. You want to buy at a reasonable price. You want to get as much as the business is worth to the buyer, says Sherman. Source: Inc
Don’t agree to anything you don’t like
It can feel like once you get to a certain point, it’s too late to back out. But don’t ever feel pressurised into going through with a deal, if the terms aren’t right or you get a bad feeling about it – even at the last minute. Be clear about what you want and where you’ll draw the line in negotiations – then make sure you stick to it. Source: ManagementToday
Hiring a great accountant will help you get an edge in your negotiations. Call us so we can assist you!