One of the most important decisions a person can make is selling or buying a business. There are several points to take into consideration before you make that decision. Here are some key points involved in selling or buying a business.
Key Point #1 – What Are You Selling?
It is important to ask a few simple questions when selling or buying a business. What are you selling? What is not included in the sale? Is any real estate included in the sale price? Are vital assets included in the sale price?
Key Point # 2 – What Are The Range Of Assets?
It is very important to understand the range of assets that are included with a business. What is proprietary? Are there patents, formulations, and software involved? These types of assets will be essential for its long-term success.
Key Point # 3 – Evaluating Assets For Profitability
Not all assets are equal. Sell assets that are not earning money or are too expensive to maintain. It takes due diligence and focus to determine which assets are strains on a business’s bottom line. Do not overlook this important step.
Key Point # 4 – Determining Competitive Advantage
What gives a business a competitive advantage? What can you do to give your business a competitive advantage if it doesn’t already have one? Buyers should understand where a business’s competitive advantage lies and how you can best exploit that advantage moving forward.
Key Point # 5 – How Can The Business Be Grown?
Both buyers and sellers should try to determine how to grow a business. Sellers don’t need to have implemented business growth strategies when placing a business up for sale. But, they should provide prospective buyers with ideas and potential strategies.
Key Point # 6 – Working Capital
Some businesses are more capital intensive than others. It is important to know how much working capital you’ll need to run any prospective business.
Key Point # 7 – Management Depth
It is important to know the depth of your management team. How experienced is the team? What can you expect from that team? How dependent is the business on the owner? You need to know if the business may fall apart when the owner leaves.
Selling or buying a business is often more complex than people believe. There are many variables to take into consideration. Some factors not discussed in this article include how financial reporting is undertaken, labor relationships and more. Due diligence, asking the right questions and patience are all key in making your business a more attractive asset to buyers or for finding the right business for you. EBIT Associates can help you through the process of selling or buying a business.