Guidelines (Do’s and Don’ts)

Buying or selling a business can be a transformative decision. It is important to consider your goals and do a thorough evaluation of all internal and external factors that could be affected if you buy or sell a business. Listed below are the Do’s and Don’ts of buying and selling a business.

For Business Buyers

When buying a business it is important to:

  • Do ask the seller several questions.
    You should ask the seller business related questions. The seller can inform you everything about the business, especially because of his/her experience. You can ask the reason for selling or other questions about operation, profit margin, etc.
  • Do apply for financing (if needed).
    If you want to purchase the business but you don’t have sufficient funds, you should consider financing. There are lenders who are willing to cover 100% of purchase costs. You may also ask assistance from your business broker (e.g. paperwork, other financing options).
  • Do negotiate for the price.
    Business prices are often negotiable. There are sellers who are willing to lower their price to a certain amount. For some instances, the asking price may be lowered substantially especially if the owner is moving abroad (or in another state) or if the seller requires immediate funding.
  • Do consider taxes, liabilities, and lawsuits.
    Purchasing a business could mean that you would also purchase all the short term and long term liabilities, pending taxes, and lawsuits that come with it. Carefully review the company before purchasing it.
  • Don’t purchase a business that you are not familiar with or have no interest with.
    Purchasing a business that you are not familiar with is a tragedy waiting to happen. Don’t purchase a business just because it is profitable.
  • Don’t rush the decision.
    It is better to get professional opinion before purchasing a business.
  • Don’t do the purchase alone.
    Get legal advises from lawyers, accountants, and business brokers in Colorado. They can provide business options that could be profitable for you. They could also assist you on several business matters such as getting business permits, obtaining finances, etc.

For Business Sellers

  • Do formulate a concrete exit plan
    A detailed exit plan must be drafted. Review past financial records, make a sales forecast or financial statement, and come up with a final selling price. You may ask for assistance from an experienced business broker.
  • Do recruit professional help.
    Hire a professional appraiser to get the fair market value of your business. Business brokers can help you in finding potential buyers, marketing your business, managing paperwork, and taking over the entire selling process.
  • Do maintain strict confidentiality
    Only share crucial business information when the buyer issued a formal letter of intent to purchase your business. Crucial information may include financial records, business operations, journals, etc.
  • Don’t overprice the business
    Set a realistic asking price for the business. Higher would equate to a longer waiting period. Stay open for negotiations.
  • Don’t forget to tell stories
    Interested buyers would like to hear the history of the business – how it began, when it began, how did it flourish, and why are you selling the business.
  • Don’t forget to run the business.
    Selling a business is a long-term process. It may take months before your business can be sold. Make sure to continue running the business until the business has been officially transferred to its new owner.