10 Steps in Buying a Business – Part 3

This week we look at the final 6 steps to consider when buying a business.

5. Intellectual Property. Is ownership on favorable terms for access to all intellectual property that is relevant to the wellbeing of the business included in the sale price? Are patents which have been valuable in providing market exclusivity in the past, about to run out? Does the business retain the capacity for innovation or personnel that may have been instrumental to its market position in the past? Do you have what it takes to continue provide such innovation?
a. IP may include websites, designs, and other items essential to the business being recognized and found in its market. Check to ensure that the site has not been written and maintained by someone who will not come along – leaving your great marketing machine without a driver, and quite possibly, leaving it in a state that is impossible to be transferred to your marketing people.

6. Non-compete agreement to not allow your seller to become your next competitor. What restraint conditions also apply to your seller – and to the key staff you may be taking on?

7. Facilities. Is the seller going to be your landlord? If so, ensure that you agree on third-party valuations and lease conditions no more arduous than you would face from an unconnected landlord. Ensure you have clarity around your rights to alter the premises to meet future needs. It may be advantageous to include an Option to Buy if the real estate deal makes sense in its own right. Avoid taking on an “obligation to buy” under any circumstances – unless you have carefully assessed value and it is too good to miss.

8. Brains. Is it worthwhile retaining the seller as a consultant for a transition period? If so, make this a formal, paid arrangement (you could carve the projected fee out of the sell price and pay it piecemeal over the period). Utilize a formal agreement as to who does what in terms of results and outputs and for how much. Make sure the termination process is crystal clear.

9. Study is Cheap – Experience is Expensive. Educate yourself on the ins and outs of buying any business before you go ahead and do it for real.

10. Insurance. Work with a professional Business Coach with a proven track record of producing results with their clients across a wide range of industries (including the ones you are looking into) and use them to guide you in:
a. Evaluating the business and how well it fits what you really want from a business.
b. Clarifying your exit strategy. Yep, before you buy, work out how you will get out and when.
c. Negotiating the price.
d. Ensuring a smooth transition so that you retain key staff, customers and suppliers.
e. Installing the systems and processes that will take your new business to a new level, realize its true potential and provide you with a low-stress high-return investment.
f. Developing the coaching skills to lead your management team to success in a way that leaves you with the time and energy to enjoy the quality of life that you desire.

Well that does it. Not for the faint of heart, so make sure buying a business is a necessary ingredient to your future growth and success.

Combining Vision and Innovation to Create the Future

Start here to gain that competitive edge: http://www.ignition-pathway2growth.com/

© Rich Kohler 2015. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.

Tags: , ,

Leave a Comment