Questions to Ask When Buying a Business (Part 5)

MOTIVATION TO SELL

• Is it a motivated seller and why?
• How much debt does he need to pay off? (mortgages loans?)
• How much cash does the seller immediately need?
• Does he need that cash all at once?
• Is he looking for a way to avoid capital gains? Or reduce or spread out his tax liability?
• Are there other family members involved in the decision making process?
• Has the reputation of the company been damaged at all?
• How dependent has the business been on the current owner? Relationships with employees? Customers? Vendors?

 
STRATEGIES TO CONSIDER WHEN BUYING A BUSINESS

• Consider buying on installment
• Don't ever be shy in asking for information- your strategy is to "discover" as much as you can
• Consider holding back some of the purchase price until after closing- say six months or a year in case you suffer a loss due to the owner failing to "disclose" information
• Consider buying land in one deal and the company in another- if the two are indeed owned separately
• Consider and 'earn-out' provision where seller only gets paid if certain financial milestones are met

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Featured in the Daily Herald Business Section

This Series is being featured in the Daily Herald. Please enjoy Jim Kendall's Column:
​http://www.dailyherald.com/business/20171022/what-to-ask-before-buying-a-business