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How to Buy a Business

“How to Buy a Business”

(Business Builder — long form) Consider buying a business if you want to go into business for yourself but don’t want to go through the hassles of starting one yourself.>


Your decision to buy a business can mean a significant change in your life. Just as in starting a business, buying a business involves many unknowns which if not taken seriously, could result in serious financial losses. This Business Builder will take you step-by-step through the process of evaluating the right business to buy, negotiating the purchase, financing the purchase, and protecting yourself against any unforeseen circumstances once you close the deal.


You might consider buying a business if you want to go into business for yourself but don’t want to go through the hassles of starting one yourself. Or maybe you have owned and operated other businesses and know what it takes to run a successful business. Either way, you should be aware of the pros and cons of buying an existing business.

Advantages to Buying an Existing Business

Many opportunities exist to buy a good business as long as you conduct sufficient due diligence. Many reasons exist for selling a good business (retiring owner, partnership dispute, illness or death of one of the principals, divorce, restructuring of a large corporation, etc.), and if you’re able to find a good business, you could enjoy the following advantages:

  • It may be easier to obtain financing when buying an established business since there is a proven track record.
  • You can begin business operations with an established customer base, thus eliminating a waiting period for business.
  • If the business is already profitable, you can immediately take a regular salary.
  • The marketplace is already established.
  • You can immediately devote your attention to the product and service, since the operating facilities and employees are already in place.
  • The inventory is already established and in place.
  • Depending upon the seller’s situation, you may be able to buy the business at a bargain price.
  • The previous owner can provide you with insights on running the business.
  • Employees are available.
  • You have the benefit of business records in which to guide your decisions.
  • The cost of going into business may be easier to determine.
  • Initial financial outlay may be less than a startup if you structure the deal accordingly.

Disadvantages of Buying an Existing Business

While there are many advantages, there are disadvantages you must consider, too. The chief disadvantage is that you could get stuck with someone else’s problem. Others may include:

  • You could pay too much for the business if you are not careful.
  • The prior owner may have a bad reputation that you must overcome.
  • Facility location may not be optimal.
  • Facilities and equipment may be outdated or in bad shape.
  • The previous owner could reopen and become a competitor.
  • The building lease may be ready to expire and rent hikes imminent.
  • Financial records may not be a true indication of reality.
  • There may be some hidden losses that are not disclosed.

Major decisions in life can produce stress. In order to keep stress in check when going through the process of buying a business, educate yourself as much as possible. This Business Builder will be your first step. Because the process of buying a business can be very complicated and involve skills such as negotiating the sale, assessing the value of the business, and considering current tax implications, we recommend you retain professional advisors, a qualified attorney and accountant, to guide you through your purchase.


The process of buying a business is a very serious and complex undertaking, each one differing on a case-by-case basis. Nevertheless, whatever kind of business you buy, you will need to consider the following six steps:

  • Finding a business
  • Evaluating the business
  • Establishing the price
  • Structuring the deal
  • Financing the purchase
  • Closing the deal

Finding a Business

Before you do anything, you’ll need to decide on the kind of business you’re interested in buying. Consider your interests. What are you good at? What do you enjoy?

According to Lionel Haines, you should be asking yourself the following questions:

  • Are you looking for a manufacturing, distribution, service or retail operation?
  • Where do you want the business to be located?
  • How big do you want the company to be? Sales? Number of employees?
  • Do you want to be an absentee owner or the manager of the business?
  • What level of risk is acceptable to you?
  • Are you looking for a business that is highly leveraged? Do you have your own money to pay down some debt?
  • Are you willing to share equity?

    Source: How to Buy a Good Business with Little or None of Your Own Money, by Lionel Haines (Crown, 1987).

After answering these questions, you then need to give a lot of thought to the industry and specific business you are interested in. Make sure that the industry and resulting business you are considering has a bright future. You don’t want to get into a situation where the industry is stagnant or slowing in growth and is saturated with more than enough suppliers. Many industries and businesses these days are cutting back, restructuring. Look for industries with a bright future.

The best way to obtain reliable information on an industry is to talk to experts in that industry. This may include business owners, suppliers, trade publications and associations. Bookstores and your local library can also provide you with a wealth of information. To help you with your research, you may want to investigate the following:

    Industry Outlook —

    U.S. Industry & Trade Outlook. Five-year forecast for over 350 industries, U.S. Department of Commerce, Bureau of Industrial Economics, Washington, DC 20402

    Trade Associations —

    National Trade and Professional Associations of the United States. Columbia Books, Inc., 1350 New York Ave., N.W., Suite 207, Washington, DC 20005

    Encyclopedia of Associations. Gale Research Co., Book Tower, Detroit, MI 48226

    Trade Publications —

    Business Publication Advertising Source. Listed by industry. Standard Rate & Data Service, Inc., 1700 Higgins Road, Des Plaines, IL 60018-5605, (800) 851-7737. Use the same tool you use to find places to advertise to find trade journals to subscribe to.

    Company Directories —

    Dun & Bradstreet Million Dollar Directory.
         Volume 1: Companies with net worth $1.2MM
         Volume 2: Companies with net worth $900K-$1.2MM
         Volume 3: Companies with net worth $500K-$900K
    Dun & Bradstreet, Inc., 3 Century Dr., Parsippany, NJ 07054

    Thomas Register of American Manufacturers. (Annual). A limited Web version is available at the Thomas Register Web site. Thomas Publishing Co., 1 Penn Plaza, New York, NY 10119

    Manufacturers Registers and Service Company Registers. State directories usually are published by local publishers. Visit your library to see the ones for the states in your region. Call your library and ask for the price and source if you know you want to buy one.

    Directory of M and A Intermediaries. The leading source of information on merger and acquisition intermediaries in the U.S., Venture Economics/Thomson Financial Services, 50 California Street, Suite 1700, San Francisco, CA 94111, Phone: 415.989.9797

    Source: How to Buy a Good Business with Little or None of Your Own Money

Where to Look

Buying a business can be challenging and rewarding, but it is also hard work and can be risky to your financial future. It pays to be careful and diligent. Do your homework before making your decision.

You can find a business to buy several ways. One way is to search the classified section of your local newspaper, magazine or trade association journals. Advertisements in these periodicals often do not describe very much about the business but can be a good source to aid your search. Also, talk to the people who run the trade associations in industries you are interested in. Many times they have "insider" news on businesses that may be looking for a buyer but haven’t gone public with the news yet.

  • Business brokers and Realtors are also excellent sources to utilize for a business sale. A disadvantage in using the services of a broker or realtor is the commission they earn from the sale, often 10% of the sale price. Because of this commission, they will want to get the highest selling price possible for the business. Likewise, the seller will most likely want more from the sale knowing there is a commission to pay.
  • Check with wholesalers and vendors in the industry. Ask them for referrals for businesses that are or might be for sale.
  • You can also consult your local chamber of commerce, who can provide you with good information about the business community as well as leads to firms that are for sale.
  • Your attorney, accountant, and banker may also be able to help you with leads before the sale is publicized on the market. A client will often tell his or her attorney, accountant, or banker that he is contemplating selling the business or retiring long before the formal decision is made. It’s in the best interest of these professionals to find a suitable buyer for their client in order to sustain their business relationship.
  • Your insurance salesman may also be a good source of leads. Insurance brokers tend to have an extensive network and an intimate knowledge of the financial and physical health of entrepreneurs. They frequently know about impending retirements due to pension activity. You may want to arrange a sort of finders fee to further motivate this person on your behalf.
  • Also, take out ads in trade journals, newsletters or business publications to announce that you are interested in buying a business. Make the copy simple. It need not be more elaborate than: "I want to buy your injection molding business with sales of $5 to 10 million, cash positive, and profitable in the last 5 years." This will connect you with possible candidates. Make sure you use a blind box to screen potential sellers; otherwise, your phone will be ringing with many opportunities you’re not the least bit interested in.
  • Don’t be afraid to directly approach a business that may not be for sale, but you might like to buy anyway. Even though the owner wasn’t planning to sell, your interest in buying may be enough to encourage the owner to sell out to you. Also, many sellers of successful businesses never advertise their businesses for sale. A seller may do this for many good reasons — maybe he doesn’t want his employees to know that he’s looking to get out, maybe he doesn’t want to signal to customers or suppliers of his potential exit, or maybe he just doesn’t want to deal with the hassles of unqualified buyers.

Evaluating a Specific Acquisition

To evaluate a prospective business, you should investigate a number of factors to determine whether it is a good acquisition candidate or not. Some of these may be:

  • Owner’s reason for selling — Just as you would ask when buying a car, "Why are you selling your car," you should also want to know why the owner is selling his or her business. Most likely the owner is retiring or in ill health, but don’t take this for granted. The real reason might be that there is ongoing trouble in the neighborhood, repeated robberies or vandalism. Or maybe a major competitor is coming into the area. Maybe the business has financial problems. Make sure you thoroughly investigate every potential reason. You may want to talk to other businesses in the area. Call some of the suppliers to the business to check on its credit and history for prompt payment.
  • Business reputation — The best situation to be in when buying a business is to inherit the good reputation that the existing business acquired during its life time. You don’t want to inherit a nightmare because it could take years to turn that reputation around. Customers and suppliers are a good source of this information.
  • Profitability — You will want to know how profitable a business has been over several years, not just the current one. Request that the financial records be available to you or your accountant. Are the records complete and orderly? If not, is this an example of the business as a whole? The income tax and sales tax returns are the most reliable sources of information. If the owner refuses to release the records to you or your accountant, you may decide to discontinue the sale process. Nothing positive can be gained by the owner’s lack of cooperation. For further information on financial analysis, you may want to refer to the Business Builders How to Analyze Profitability, How to Prepare a Profit and Loss Statement, and How to Analyze Your Business Using Financial Ratios.
  • Assets and Liabilities — You should inspect the business premises for outdated or worn equipment, damaged inventory. Is there sufficient space to continue the business effectively? Are areas of production safe? The answers to these questions and more will help determine the value of assets and liabilities of the business. Review the terms of any leases, especially termination clauses. Check for assets that would be vital to the ongoing business after the sale — mailing lists, patents, trademarks and copyrights. Request a copy of the balance sheet and evaluate it thoroughly. If you need more information on how to do this, please refer to the Business Builder How to Prepare and Analyze a Balance Sheet.
  • Personnel — Successful businesses typically have key employees that are valuable to its future. Check with them about their future plans. After all, you don’t want them leaving once you have purchased the business. Also, investigate the depth in management. Is it a strong team or does the owner run the show?
  • Customers — Require the current owner to disclose his customer list. Contact these customers (especially the key ones) to ensure they will continue doing business with you once the business is sold.
  • Location — Visit the location of the business and talk with local business owners and bankers. Is the area growing or shrinking? Are there any competitors close by? Is the neighborhood safe?
  • Hidden Liabilities — Although an extensive review of the business financial records is a must, it may not uncover all of the business liabilities. If you are going to assume the liabilities of the business, specify on the written sales agreement exactly which liabilities will be assumed along with the dollar amount of each so that you are not held liable for others of which you may not be aware. Examples of hidden liabilities are:
    • Unpaid back taxes. For instance, are sales, unemployment, FICA tax payments current?
    • Undisclosed law suits. Are there any current or pending lawsuits?
    • Unpaid bills. Review accounts payable and determine the age of unpaid accounts.
    • Pension liabilities. This could prove serious if the seller maintains or contributes to a pension fund and has unfunded pension fund liabilities. Ask the seller for the current status of the pension fund.
    • Vacation liabilities. If the employees are eligible for accrued but unpaid vacation pay, and the seller has been negligent in contributing to this fund, you may inherit a significant financial liability. Ask for disclosure of this account, as well.
    • Environmental liabilities. If you are buying a business that owns land, check to make sure there hasn’t been any restrictions or, worse, unpaid fines or penalties attached to the property. It is a common practice to require the seller to make detailed representations and warranties concerning environmental matters. You might also consider as a condition of sale an in-depth environmental audit.
  • Your Preferences — Finally, ask yourself whether you would enjoy operating this business. Be honest. The last thing you would want to do is to buy a business with which you soon become bored, frustrated or overwhelmed.

Establishing the Price

Determining the price of a business is one of the most subjective steps in buying a business. Typically, the buyer wants to negotiate a lower than fair price for the business while the seller wants a higher than fair price. Somewhere between the two is the realistic price.

Factors Influencing Price —

According to Shannon Pratt, a business evaluation expert, the following are factors that will influence the price of a business, positively or negatively, depending upon your specific situation:

  • Recent profit history. If it’s strong, it puts the seller in a more favorable position to ask for more money.
  • General condition of the company (its facilities, completeness and accuracy of books and records, morale). If conditions are lackluster, the buyer has some leverage here.
  • Market demand for the business’s product or service. If demand is shrinking, so should the asking price.
  • Economic conditions (cost and availability of capital, industry health). In times of prosperity, it may, indeed, be a seller’s market.
  • Transfer of goodwill and other intangible assets. Is the reputation of the business strong? If so, that will increase the asking price.
  • Future market potential of product or service. If the market is growing, so will the price.

These factors help determine the fair market price, but there are additional considerations that may influence the price up or down. They are:

  • Special circumstances of the buyer or seller. For instance, if the seller wants to unload the business quickly, he may have to make some price concessions. On the other hand, if the buyer can realize additional economies of scale based on other businesses he owns, he may be willing to pay a little more.
  • Tradeoff between cash and terms. For instance, if the seller accepts a small down payment and a note to buy the business, the seller may be satisfied with a higher than fair market price. However, if the buyer is able to pay the seller in full, the seller may consider a discount to the fair market price.
  • Tax consequences resulting from the structure of the deal. For instance, if the structure eases the tax burden for either party, that party is likely to make price concessions.

Methods for Determining Value —

At this point, it is recommended that you use a qualified CPA to assist you. There are many financial considerations that must be closely reviewed, and the tax laws are constantly changing. Your trusted financial advisor is the most capable to structure a deal that’s best for you.

Two simple methods for determining the value of the business are the net worth approach and the return on profits approach.

The net worth approach uses the balance sheet to establish worth. In this case, auditors are called in to audit the premises to verify the assets and liabilities. The assets are totaled. From that, the liabilities are subtracted, and the difference is net worth. A simple example might be:

Current Assets $100,000
Long-Term Investments $300,000
Fixed Assets $1,250,000
Total Assets $1,650,000
Current Liabilities $40,000
Long-term Liabilities $95,000
Total Liabilities $135,000
Total Net Worth $1,515,000

Alternatively, the return on profits uses the income statement to establish worth. This method is based on the fact that you have choices of where you can invest your money in order to produce a return on your investment. For low risk investments (savings bonds, for example), you expect a low return. However, as your risk increases, so should your return on your investment. To value a business using this method, you determine your expected return on investment (ROI) and divide that into the average annual profits of the business.

    For example, you may decide that it’s not worth your time or money to expect anything lower than a 25% ROI. Say, you are looking at a business whose average annual profits are $500,000. That means the price that you are willing to pay for the business would be:

    (Average annual profits)

    $500,000 / (ROI)25% = 2,000,000(price)

There are other more complicated methods that may be used to value a business, such as the discounted future cash flow method. Again, it’s recommended that you seek professional advice when determining the value for a business. A qualified financial advisor will know which method best suits your circumstances.

Structuring the Deal

Once you have an idea of a fair price, you are now ready to structure your deal. Here again, tax and other consequences of the structure have a critical effect on the attractiveness of the deal. Since tax laws are constantly changing, you should consult with your attorney and CPA to get the most benefits.

There are several different ways you can structure your purchase. Some of the more common ones are:

  • Asset vs. Stock Transaction

    When purchasing a business, you have a choice between buying the assets or the stock of the business. In the asset method, the buyer buys all of the assets except cash and accounts receivables. The seller uses this money to pay off all liabilities. This protects the buyer from assuming any liabilities that may not have been disclosed. The stock method, however, calls for all assets, liabilities, and stock to be transferred to the buyer. This sometimes is the most desirable of the two methods because it minimizes the amount of changes that need to take place (e.g., supplier contracts, lease agreements, etc.). The risk of assuming undisclosed liabilities can be reduced by including in the agreement of sale a provision for offsetting payment to the seller for these undisclosed liabilities.

  • Installment Sales

    It is very rare that the purchase of a business is an all-cash proposition. In most cases, the buyer provides for a down payment with the rest financed by the seller through a promissory note secured by the assets of the business. For instance, the buyer may make a down payment for 25% of the total purchase price with the rest paid by a note with an interest rate of 9% over a period of 15 years.

  • Leveraged Buy-out

    This is similar to an installment sale in that the assets are the collateral for the purchase of the business. However, the difference is that the buyer puts very little of his own money into the business. Instead of a down payment from the buyer with the owner financing the rest, a loan is secured through a lending institution with the assets serving as collateral. This option is used when a business has a large asset base. The downside, however, is that it burdens the business with debt.

  • Stock Exchange

    In some cases the seller may accept stock as payment for the business. Frequently, there is a waiting period before he can cash in the stock. However, this can be to the seller’s advantage since he doesn’t pay taxes until he cashes in his stock. You may want to check with your attorney or CPA to be sure this provision hasn’t changed.

Financing the Purchase

You have done your homework in investigating what business choices were right for you. You searched and found the right business. You’ve negotiated the right price. You and your attorney have decided on the structure of the deal. Now you need to determine how you are going to finance the deal.

Financing Options

Equity financing. You can invest your capital up front in the business or during the operation of the business. Your equity may be in the form of cash or assets such as equipment or real estate. If possible, you may provide all the equity yourself, in which case, you would be sole owner, or you might have to solicit other investors who would retain a portion of ownership in exchange for their capital.

Debt financing. Banks, suppliers, friends, or family members can serve as investors in your business. Their investment is repaid from profits of the business and involves a principal and interest payment. This option can be difficult should your business experience financial hardships for a extended period of time.

Short-term lending or a line of credit. This form of financing consists of working capital loans made by banks or other credit companies. The term of the loan is usually one year or less. You can obtain this financing by using the assets of the business. You may be asked to secure this loan with some personal collateral, as well. This may include real estate, marketable securities, or the cash value of insurance policies.

Long-term lending. This type of financing, which extends beyond a year, is for the purchase of major assets such as equipment, machinery, or fixtures. Collateral for these larger loans almost always requires a first lien on the most liquid tangible assets — accounts receivable, inventory, equipment, and real estate — as well as some type of personal guarantee.

Other. If you are unable to obtain a loan from a lending institution, look into obtaining an SBA guarantee or underwriting from a state or municipal economic development agency.

Estimate of Capital Required

Complete the following worksheet to help you determine how much capital you may need to purchase the business.

Down Payment $
Additional inventory needed $
Improvements to facility $
Additional equipment,fixtures, etc. needed $
Required deposits:
    utilities $
    sales tax $
    telephone $
    rental fees $
Supplies $
License, permits, and filing fees $
Legal/accounting fees $
Pre-opening expenses $
Miscellaneous $

Other "Creative" Financing Options

Finally, let’s discuss some creative financing options, which can involve "no money down" or extended monthly payments. Sellers will sometimes offer this type of financing to entice more potential buyers. These options may include:

  • A portion or all of the down payment can be deducted from the initial month’s revenues. This is done by a series of short-term notes.
  • You can offer something in trade (e.g., real estate, a marketable security, etc.) rather than using cash as a down payment.
  • The seller can sell some of the business assets, such as equipment and machinery, separately, thus reducing the overall value (i.e., price) of the business. For instance, maybe there is a portion of the business in which the buyer is not interested. The owner could sell those assets to another party and receive payment for the rest from the buyer.
  • A graduated payment schedule may help if there is a problem with the monthly payments on the debt incurred — with higher payments occurring in the later years. An example might be:

      You pay $1,000 a month in year 1

      You pay $1,500 a month in year 2

      You pay $2,000 a month in year 3 through 5

Closing the Deal

Purchase Preparations

Again, involve your attorney fully in this phase. Your attorney will prepare a public notice to creditors for the transfer of title of the business. This notice, called a bulk transfer notice, prevents the seller’s unsecured creditors from attaching liabilities to the property, thus prohibiting you from a free and clear sale.

Your attorney will also check with the Secretary of State’s office for any liens recorded against the property. A title search performed on the property will eliminate any unknown claims against the property not previously disclosed by the seller. Other items of importance are:

  • Certify that all state employment taxes are paid to date. You could be liable for any unpaid taxes if not careful.
  • Obtain from the seller a sales and use certification verifying that all outstanding sales and use tax payments have been paid.

Extending the Offer

In order to obtain the information needed to make a legitimate offer, you will most likely be asked to sign a confidentiality agreement to protect the seller from disclosure of proprietary information. Upon signing this agreement, you should expect any and all information you need to make an offer. If you do not get full disclosure, you may decide to discontinue the proceedings at this point, or make an offer contingent upon receiving this information. In turn, the seller may request a personal financial statement from you to determine your qualifications as a suitable owner.

Your offer can take the form of an agreement of sales or letter of intent. The former is usually binding, the latter non-binding. In either case, according to the U.S. SBA, it should contain the following information:

  • Total price offered.
  • Breakdown of the elements of the price (down payment, owner-financed portion).
  • Listing of the assets/liabilities being purchased with their estimated value.
  • Operating condition of all equipment at the time of sales.
  • Right to offset undisclosed liabilities with future payments.
  • A provision calling for compliance with the Bulk Transfer provisions of the Uniform Commercial Code.
  • Warranties for clear and marketable title, validity and assumability of existing contracts, tax and legal liability limitations and any other appropriate warranties.
  • A provision to make the sale conditional on lease agreements, financial verification, transfer of licenses, ability to obtain financing.
  • Provision for proration of rent, utilities, wages and prepaid expenses.
  • A non-compete agreement from the seller.
  • Allocation of the purchase price.
  • Restrictions on how the business should be operated until settlement.
  • Date of the settlement.

    Source: Starting Up Your Own Business — Expert Advice From the U.S. SBA.

Including All Appropriate Documents

The agreement of sale is the primary document for closing the purchase, but there are usually other supporting documents, as well. The common ones are

  • Settlement Sheet — Shows costs/adjustments to be made at the time of settlement.
  • Escrow Agreement — Identifies the conditions for escrow and the amount.
  • Bill of Sale — Identifies the assets purchased along with their price.
  • Promissory Note — If owner finances any of the purchase price, it specifies the amount of the note and terms for repayment.
  • Non-compete Agreement — Protects the buyer from immediate competition from the seller. It must always specify a limited, but reasonable amount of time to be legally enforceable.
  • Employment Agreement — If you require the seller to remain involved for a period of time after the sale, here you would specify the amount and conditions for his compensation.
  • Protecting Yourself — As mentioned earlier, you should have your attorney include a note in the agreement of sale to protect you from any misrepresentations in the contract of sale made by the seller. This note will allow you to reduce the principal amount of the note if certain contingencies occur with the sale of the business. Or you may escrow a portion of the funds due to the seller to take care of these hidden charges. Decide with your attorney on the life of the note or escrow account, perhaps one year from the settlement date.



  • Why does the owner want to sell?
  • Will the reputation of the business be helpful or harmful if you take it over?
  • Obtain tax returns, bank deposit records, and other necessary financial information.
  • If not already profitable under the current owner, how will you create a more profitable business?
  • Review or have reviewed by your attorney the provisions of key contracts, leases, franchise agreements, or any other legal arrangements which have a significant effect on the business.


  • Make sure that the purchase price is fair. Can you afford it? Will you have enough working capital to run the business properly after you have paid the purchase price?
  • Be sure to get accurate and up-to-date financial information and supporting data early on in the negotiation process.
  • Insist on an allocation of the purchase price to specific assets in the sales agreement.
  • Look for hidden liabilities, such as pending law suits, accrued vacation liabilities, unfunded pension plan liabilities, or potential exposure to environmental costs.

Finalize the Deal:

  • Have your attorney fully involved in preparing the sales agreement.
  • Be sure there are no liens or other claims against the property not already disclosed by the seller.
  • Have the seller obtain and furnish a certification that all taxes are paid to date.
  • Plan to hold back part of the purchase price as security to reimburse yourself for any misrepresentations as to assets or liabilities by the seller.


Finding a Business

___ What type of business are you interested in?

___ Where should you look for a business to buy?

Evaluating a Specific Acquisition

___ Ask the owner his/her reason for selling

___ Find out the business’ reputation

___ Find out how profitable the business has been

___ Check the business’ assets and liabilities

___ Is there a strong personnel? How many employees?

___ Will the customers continue doing business once it is sold?

___ Check on the location of the business

___ Are there any hidden liabilities?

___ Would you enjoy operating the business?

Establish the Price

___ What are the factors influencing the price?

___ Determine the value of the business

Structuring the Deal

___ Make a choice between buying the assets or stock of the business

___ Determine if you prefer an installment sales

___ Determine if you prefer a leverage buy out sale

___ Determine if the seller will accept stock as payment for the business

Financing the Purchase

___ Determine how you need to finance the deal

___ Determine how much capital you may need to purchase the business

___ Discuss some creative financing options

Closing the Deal

___ Involve your attorney in purchase preparations

___ Extending the offer

___ Make sure you include all appropriate documents

___ Have your attorney include a note in the agreement of sale to protect you from any misrepresentations with contract of sale made by the seller

A Worksheet for Buying a Business

___ Make sure you investigate

___ Check to be sure price is fair

___ Make sure you receive accurate and up to date financial information

___ Check for hidden liabilities to enable you during negotiations

___ Finalize the deal



The Small Business Handbook — A Comprehensive Guide to Starting and Running Your Own Business by Irving Burstiner. (Simon & Schuster/Fireside, 1997).

Steps to Small Business Start-Up: Everything You Need to Know to Turn Your Idea Into a Successful Business by Linda Pinson and Jerry Jinnett. (Dearborn Publishing, 2000).

Mind Your Own Business! Getting Started as an Entrepreneur by La Verne Ludden and Bonnie Maitlen. (JIST Works, Inc., 1999).

Valuing Small Businesses and Professional Practices by Shannon P. Pratt. (McGraw-Hill, 1998).

The Upstart Guide to Buying, Valuing, and Selling Your Business by Scott Gabehart. (Dearborn Publishing, 1997).

Web sites

U.S. Department of Commerce — Office of Business Liaison

U.S. Small Business Administration

Writer: Lynn Phillips

All rights reserved. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher.