Three Professionals To Have On Your Team When Buying a Business
Buying a business is a big commitment and, while you may feel you’ve found the perfect company, you need a second or sometimes third set of eyes to look at it objectively and determine if it’s worth buying. Furthermore, you need a skilled professional to help evaluate the business and guide you through the transaction process. This usually requires expertise in not one, but many areas, including business valuation, acquisition, legal, and sometimes real estate.
1. A good attorney. Here's why you need one:
- A key component in buying a business is ensuring the transaction is done legally and properly. From contacting the owner and signing a non-disclosure agreement, to deciding on the structure of the purchase, nearly all documents should be reviewed by your attorney.
- You will also need to decide who will be buying the business – you personally or your company? Or, will you be buying the assets or shares?
- An experienced attorney will know what makes the best sense. Your attorney will also assist you in negotiating the purchase terms, the purchase and sale agreement, as well as any other details involved in transferring ownership.
How do you choose an attorney when buying a business?
- When it comes to business acquisitions, your attorney’s input can have a strong impact on the outcome of the deal.
- They should be experienced with small to mid-sized business acquisitions, the different types of business structure and how to protect you against any liabilities or tax obligations.
- They should be able to guide you through due diligence, transferring permits and licenses. They should also know what documents need to be filed with the courts and how to deal with employees.
- Depending on the transaction, it may also require the expertise of labor or tax, or real estate attorneys.
- Before hiring any attorney, interview them, ask for references and check to ensure that no malpractice suits have been filed against them.
2. A sharp accountant. Here's why you need one:
- One of the most important things to consider about buying a business is its financial performance. Yet, many small businesses are not the best bookkeepers.
- Additionally, their accounting methods focus on minimizing their taxes. As a result, their financials may not show much of a profit, or any profit.
- An experienced account will review their financials and ask the owner specific questions about how they make their money.
- An experienced account can help you determine the seller’s discretionary earnings (SDE) and the business’ earnings potential, giving you sense of how much it’s actually worth.
How do you choose an accountant when buying a business?
- A good accountant should be a Certified Public Accountant (CPA) through the American Institute of Certified Public Accountants and be experienced in your industry.
- They should be experienced with small business acquisition, including financial due diligence and business valuation. They should understand that there are several valuation rules of thumb, and not all types of businesses are valued using the same method.
- Many accountants are also credentialed in business valuation and are certified as professional business appraisers.
- Ask for a referral from someone you trust, such as your attorney or business broker. They may know of an accountant who is experienced with business acquisitions.
3. An experienced business broker. Here's why you need one:
- An experienced business broker is familiar with the local market, has established relationships with the business community and can help you search for a business for sale.
- Most brokers usually specialize in certain industries. They can advise you on what to look for and what to ask the owner.
- Oftentimes, they also do professional valuations and can tell you how much the business is worth.
- They can also assist you in putting together an offer, guide you through negotiations and help you close the deal.
How do you choose the best business broker?
- Search BizBuySell’s Broker Directory to find a broker in your local area. The broker’s profile should show the types of businesses they’ve sold and their areas of expertise.
- Their profile will also indicate if they are a member of professional association, such as the International Business Brokers Association (IBBA) or a state association, such as the California Business Brokers Association (CABB).
- In some states, such as California, business brokers are required to hold a real estate license, which is also important if a business includes real property or will be transferring a lease.
When it comes to buying a business, having an experienced team at your side can be extremely valuable. Their professional expertise and guidance is there to ensure you receive the most beneficial outcome. Plus, they bring a much-needed level of objectivity to a complex transaction.