Negotiate. How much downpayment. Funding source. Seller financing. Methods of purchasing. Separate assets or stock purchase.
How to strike a deal when buying a business
Whenever you are buying a business to not be the first person to bring up the subject of the price. Let the seller do this first and then you can negotiate from there.
However, deciding on a price is only one aspect of my business, it may be more important how the deal is structured. The structure of the determines how much money we as down payment, how you finance your business purchase as a truck. It is commonly suggested that you should be ready to pay 20% to 50% of the business price in cash and finance the remaining amount.
You can use a traditional lending institution or if the seller agrees to hold a note you can pay him over a period of time. Some sellers provide seller financing or agree to payments in installments because it means the continued income for them in the future. Many of them will also accept perks and benefits such as a company car. All these methods can cut down the amount of down payment that you need to make a purchasing business and can serve you well if you are short of cash. Always have your acquisition team review any arrangement for legal and liability issues whether it is with your traditional lender or with the seller.
Usually have two choices when it comes to structuring the deal provided that the transaction is not a merger. The first option is asset acquisition in which you only purchase the assets of the business. Asset accession protects you from unwanted legal liability since you are not buying the business but only by its assets.
The disadvantage is that this method can be expensive and complicated because you might have to sift and choose as to which assets are profitable and which ones you want to buy. It might get expensive because the seller may raise the price of the desirable assets to offset losses from the undesirable ones.
The second option is stock acquisition in which you purchase the stock in the business. With this method you purchase the entire business and all of its assets and assumed all its liabilities.
The final purchase contracts should be structured with the help of your acquisition team and every aspect of it should be carefully considered and scrutinized. Make sure you understand all aspects of the purchase from the viewpoint of financial, tax and legal standpoint. The contract should be all-inclusive and you should be able to rescind the deal if you feel that you are intentionally misrepresented by the company or that the business owner failed to report some critical information. It is also a good idea to include a noncompete clause in that contract may show that the seller does not open a competing operation very close to you right after he has sold his business.
You always have the option to walk away from a negotiation if you don’t like the way things are progressing. You do not have to buy the business just because you spend time investigating it and evaluating it. You have no obligation to the business seller.