1. Buying an Existing Business
There is nothing so easy to learn as experience and nothing so hard to apply…Josh Billings

2. Advantages May continue to be successful Best location
Employees and suppliers established
Equipment installed
Inventory in place
Hit the ground running
Use previous experience
Easier financing

3. Disadvantages A loser Created ill will Employees not suitable
Equipment obsolete or inefficient
Change and innovation difficult
Inventory outdated or obsolete
Accounts receivable worth less
Overpriced

4. Steps in Acquiring a Business
Analyze your skills, abilities, and interests
Prepare a list of potential candidates
Investigate and evaluate
Explore financing options
Ensure smooth transition

5. Due Diligence Process
The process of investigating the details of a company that is for sale to determine the strengths, weaknesses, opportunities, and threats facing it

6. 5 Critical Questions Why does the owner want to sell?
What is the physical condition?
What is the potential?
What legal aspects should be considered?
Is the business financially sound?

7. Physical Conditions Building Inventory Accounts receivable
Lease arrangements
Business records
Intangible assets
Location and appearance

8. Potential of Products
Customer characteristics and composition-who, why, how often, loyalty, new customers, well-defined, growing?
Competitor analysis-number and intensity, saturation point reached, reason for survival, sales comparison, uniqueness?

9. Legal Aspects Liens Bulk Transfers Contract assignments
Covenants not to compete
Ongoing legal liabilities

10. Financial Soundness Income statements and balance sheets (3-5 years)
Income tax returns (3-5 years)
Owner’s compensation (and relatives)
Cash flow

11. Methods for Determining the Value of a Business
Balance Sheet technique
Adjusted Balance Sheet technique
Excess Earnings Method
Capitalized Earnings Approach
Discounted Future Earnings approach
Market approach

12. Understanding the Seller’s Side
Picking the right buyer
Structuring the deal
Exit strategies
Negotiating the deal

13. Exit Strategies Straight business sale
Sale with agreement from the founder to stay on
Form a limited partnership
Sell a controlling interest
Restructure the company
Sell to an international buyer
Use a 2-step sale
Establish an ESOP

14. Factors Affecting Negotiations
How strong is the desire to sell?
Is the seller willing to finance part of the purchase price?
What terms does the buyer suggest?
Which ones re most important to him/her?
Is it urgent that the seller close the deal quickly?
What deal structure best suits your needs?
What are the tax consequences?
Will the seller sign a restrictive covenant?
Is he willing to stay on?
What general economic conditions exist?

15. Negotiations
Prepare
Remember the difference between a position and an interest
Develop the right mindset
Always leave yourself an escape hatch
Keep your emotions in check
Sometimes it’s best to remain silent