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Buying a Business? 14 Common Business Buyer Mistakes

The following is a discussion of fourteen common mistakes made by first-time or novice Buyers in their search for a business to purchase. Use this checklist to help you from making the same wrong moves. (1) Inadequate Assessment of Capital Resources When a business broker attempts to QUALIFY A NEW BUYER in terms of his financial resources, the primary Buyer capabilities of interest are: cash on hand available for a down payment additional funds available for working capital credit or borrowing capacity From experience, brokers recognizes the necessity of having a reserve of funds for working capital including, operating costs, transition costs, changes desired by the Buyer after purchase, additional advertising and a safety margin. The BUYER'S ASSESSMENT of his financial resources should be made prior to searching for a business to buy in order to focus efforts on acquisition candidates that fit financial capabilities. (2) Unrealistic Expectations Owning your own business is ...

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Buying or Selling a Business? What is the CPA's Role?

Whether you are buying or selling a business, your accountant can make or break the deal. If you choose to engage advisors, such as a CPA, to assist you in the sale or purchase of a business, it is important that they be deal friendly and transaction experienced. They must have a clear understanding of your objectives and seriousness in getting the transaction completed. In many instances, the sale of a business fails to close because of a CPA's actions or lack thereof. For instance, the buyer's accountant makes too many demands of the seller due to the lack of understanding of the due diligence process or the documentation that should typically and reasonably be provided by the seller. Certainly, you want your accountant to look out for your interests, but not to the point where the demands are so strenuous that the other party walks away from the deal. The failure of the seller's accountant to provide financial records and information in a timely manner to the buyer is another way to kill a deal. ...

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Buying or Selling a Business? What is the Attorney's Role?

Whether you are buying or selling a business, your legal counsel can make or break the deal. If you choose to engage advisors, such as an attorney, to assist you in the sale or purchase of a business, it is important that they be deal friendly and transaction experienced. You must articulate your objectives and seriousness in getting the transaction completed. In many instances, the sale of a business fails to close because the attorney for one side makes too many demands of the other side. Certainly, you want your attorney to protect your interests, but not to the point where the demands are so strenuous that the other party walks away from the deal. The buyer, seller, and their advisors involved in the transaction must have a mutual understanding of the price and terms of the deal.......who is getting what and for how much......or the sale may be doomed before it starts. Business brokers can refer you to legal professionals if you don't already have one that is experienced in legal issues related to b ...

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Selling Your Business? Don't Let Anyone Know!

Family and private businesses are sold in an environment that is unlike the selling environment of anything else you can imagine! Sound surprising? After you review the following ten reasons that make selling a business different, perhaps you will agree. (1) Confidentiality Making the decision to sell one's business is a difficult enough task in itself. However, once the decision is made how do you sell it without anyone knowing it's for sale? Adverse things can and do occur when people know, or think they know, a business is for sale. Confidentiality must be maintained. Here's why. a) Employees get nervous and may leave for more stable employment. They believe that the "new broom will sweep clean." That may be true in public company acquisitions but is generally not true in private company sales. Your staff represents a significant portion of your company's value. Should your key employees leave, most buyers of private companies will not buy. b) Competitors may take advantage by using the ...

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The Seller Remorse Stage of Selling a Business

Getting Cold Feet? Closing the deal can be the most challenging part of buying or selling an operating business. Valuations, investigations, and negotiations are complete and now it's a matter of getting everything into writing in a form that satisfies everyone so that the transfer of ownership of the business can take place. However, you can definitely count on someone getting cold feet just before the closing. Be prepared for this! Anticipate it happening and then work through it logically, reasonably and unemotionally. "Seller’s Remorse" doesn't happen at any specific stage of the process. It can occur at any time and the usual symptomatic thoughts start going through the seller's mind. “Do I really want to sell my business?” “At this price, am I just giving my business away?” “What if the new owner mistreats my long-time customers and loyal employees?” "What if I’m bored as soon as I retire?” “Who is this new potential owner? "Will he maint ...

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The 1031 Exchange -- Sell Business Property Now, Pay Tax Later

A growing number of investors are selling properties and paying taxes later through a deal structure called a 1031 exchange. Section 1031 of the U.S. Tax Code permits a seller of commercial properties to defer the capital gains obligation if it identifies a replacement property within 45 days of closing the sale. The seller must then close on its new purchase within 180 days of the first closing. In a typical transaction, the property owner is taxed on any gain realized from the sale. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date. Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a business owner who has outgrown a company-owned building, for example, can defer the tax liability as long as the proceeds are used to buy another building of equal or greater value within a spe ...

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Buying a Business - Questions to Ask the Seller

The following serves as an excellent checklist for a Buyer in compiling questions to ask the Seller about his business during the Due Diligence period. Potential Problem Areas to be Addressed Changes in law, New competition, Change in technology Foreign imports, Drop in demand, Equipment obsolescence Facility obsolescence, Market shifts, Down trends Employee theft, Interest rate flux, Labor problems Tax liens, Increased repair costs, Low margins Capital improvements needed, Single supplier position, Single customer position Bad receivables, Low backlog, Shipping problems Political instability, Restricted credit, Lavish facilities Closed business, Customer problems, Supplier problems Regulatory violations, Utility rate changes, Insurance cost changes Obsolete inventory, Slow moving inventory, Obsolete advertising Key talent leaving, Lease about to expire, Employee promised equity High lease escalation, Product liability claims, Patent ex ...

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Houston -- #3 Business-Friendly City in the Nation

Business is thriving in Houston........and No Wonder! Houston is the fourth-largest city in the United States, located in a culturally diverse metropolitan region of 4.8 million residents – and growing at more than twice the national pace. It has a low cost of living, a well trained and educated workforce, has one of the largest ports in the nation for the expansion into the international marketplace, has no state income tax, and is one of the top business-friendly states in the nation. Houston is booming and is ranked #3 best Metro Area for doing business by Forbes.com. Texas has the #6 best Business Tax Climate in the nation according to the Tax Foundation's 2007 State Business Tax Climate Index. The Tax Foundation, established in 1937 in Washington, D.C., provides unbiased tax information and presents facts and figures to educate the public about America's tax burdens and its impact on our economy. As reported by the Texas Workforce Commission (3/8/07), Houston's job growth rate was double t ...

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The Landlord and Lease Contingency in Selling a Business

Clear A New Lease With The Landlord Before You Sell Your Business.

A lease is a contract that represents the right to operate a business from rented premises. It is a legally binding contract between the landlord and the tenant. It sets out the terms, conditions and rights as well as the obligations of both parties in relation to the occupancy.


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The Buyer Remorse Stage of Buying a Business

Getting Cold Feet? Closing the deal can be the most challenging part of buying or selling an operating business. Valuations, investigations, and negotiations are complete and now it's a matter of getting everything into writing in a form that satisfies everyone so that the transfer of ownership of the business can take place. However, you can definitely count on someone getting cold feet just before the closing. Be prepared for this! Anticipate it happening and then work through it logically, reasonably and unemotionally. Many Buyers, particularly first-time Buyers, experience a pre-closing nervousness known as “Buyer’s Remorse.” It generally occurs during the Due Diligence phase. During this period the Buyer may begin to have second thoughts about the wisdom of buying the business. The train of thought may go something like, “Am I doing the right thing?” “Do I really want to get into this venture?” “Is this the right time?” “What if the curren ...

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