Sometimes, first-time business buyers focus 100% on the price. However, getting the lowest price does not necessarily mean that it is a good buy. Several other matters might be crucial for the success of an Alberta business once the new owner takes charge. In some circumstances, they could be more critical than the purchase price.
Here are some key questions to keep in mind?
Does the buyer have enough experience in the particular field of business?
- The purchaser might benefit from the seller’s assistance to ensure a smooth transition.
- The seller can guide the management of key suppliers and clients during the transition.
- The previous owner can help with retaining key employees.
- Insisting on the lowest possible price might jeopardize a collaborative relationship.
- Alienating the previous owner could potentially also alienate key employees.
What percentage of the purchase price can the buyer commit?
- The purchaser’s available funds will determine the size of the business that can be purchased.
- It may be unrealistic to eye a $25 million business with only $1 million to commit.
- The purchaser’s seed money will also play a role in how much funders will provide.
Can the buyer deal with the debt burden and share control?
- To answer this question, the answers to the previous questions are essential.
- The financing structure will reveal how much money will be available at the buyer’s disposal.
- Contributions by equity investors or financing vendors will determine the level of control sharing.
How does the buyer see the future of the business?
- Any plans to expand or upgrade will affect the structure of the financing.
- Committing all available personal funds to the purchase price will put pursuing visions on hold.
- Including more than the purchase price in the financing arrangement may be essential.
Answering these questions and following the advice of experienced entrepreneurs and legal counsel can lead to successful negotiations in all business acquisitions in Alberta.
