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5 things to keep in mind when buying a company – 5 Business Rules

By Nicole Krug,

October 7, 2019
Buying another company is one of the biggest decisions a business owner can make, so it’s understandable to feel anxious over the whole process.

In this episode of 5 Business Rules, Monika Jansen and I share five pieces of advice to keep in mind when buying a company. Spend 4 minutes watching the video or read on for the tips.

 

Don’t purchase a business if you don’t like the owner

You’ll need to communicate extensively with the other business owner to iron out the details of the transaction, and you’ll likely stay in touch with them even after the purchase goes through. In other words you’ll basically be married to this person for a few months, so you should pick someone you like working with. This will help establish a good relationship and open communication between both parties.

Have a good lawyer on board

A lawyer can protect your interests during the purchase process and help you know what you’re getting into. You’ll need a lawyer who specializes in business transactions to look over the business and place a value on it, and you may also want an attorney who specializes in contract law.

5 things to keep in mind when buying a company - 5 Business RulesKnow what it is you’re buying

Obviously you’re buying a business, but what exactly does that entail? Are you buying intellectual property? Are you buying stuff they’ve created in the past, or are you just purchasing a client list and goodwill? Are you buying equipment, or a team of employees? Maybe you’re taking over their building lease.

Long story short, you need to know everything that is and is not included in the purchase way ahead of time.

Purchase a company with a similar culture and method of operation as yours

When Sprint and Nextel merged, Sprint was the old school straight-laced company and Nextel was the scrappy startup. This merger didn’t work out well, and goes to show that similar companies are more likely to work well together.

Purchasing a similar company also means you’ll have an easier time providing their clients with consistent service throughout the merger process. You don’t want to jolt clients, because some of them will leave if they notice a difference after the merger.

Structure payment in a way that works for you

Your attorney will be involved in this process, and you should get their opinion as well as that of the other owner. You don’t need to go out and get this massive line of credit to make the transaction go through. You can structure it so that you pay the company owner a percentage of what you earn from sales each month.

If you have further questions about buying a company, reach out to us and let us help.

Tagged:business rulesentrepreneurgrowth strategies

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