Steps and Pitfalls of Buying a Business

Steps and Pitfalls of Buying a Business

Steps and Pitfalls of Buying a Business

You need to contact a business attorney when you consider buying a Virginia business. While every business transaction is unique, most follow the same basic steps:

Pre-negotiation

Preliminary discussions

Formal agreement

Closing

All steps require you to perform due diligence. This is an investigation into your potential investment to make sure it is sound and reasonable before purchase.

In pre-negotiation, you learn the very least a seller will accept. It is important to find this information out early on so that you do not begin negotiating for a business you cannot possibly afford.

You also need to examine the seller's financials by reviewing certain documents:

Balance sheets

Profits

Losses

Income and expenses

During the preliminary discussions and negotiations, you must be sure to perform an intensive investigation into the seller and his or her business. This includes reviewing a variety of documents and physical property:

Assets

Employment contracts

Equipment leases

Income tax returns for the past five years

Liabilities

Mortgages

Real property the business owns or leases

What happens if you fail to do your research

If you fail to do your research before you purchase a business, there is a good chance you will be stuck with an investment that fails to profit. You have to insist on reviewing documents and should be skeptical of a business owner who is reluctant to provide them.

You may find out that you have purchased problems if you fail to do your due diligence. In addition to the steps mentioned here, you should also consider speaking to people and making visits yourself. Discuss the commercial purchase with the employees, management, and union workers before you sign any paperwork.

If you find that the employees are not aware of the potential sale, there is reason to be wary. A seller who is not honest with his or her workers may not be honest with you and may leave his or her employees resentful.

Your business venture also benefits from the advice and guidance of a commercial attorney.

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