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Purchasing Strategy

Once you have determined that you want to purchase a business, you must decide on the purchase price. This will depend on a number of factors, including whether you are going to purchase the balance sheet (includes both assets and liabilities) or just the assets.

Business Structure
Once you find a business that you may be interested in, determine what type of legal entity owns the business: Sole Proprietor, Partnership or Corporation. This will affect your purchasing strategy.

Fair Market Value
Most people believe that a business should be sold for fair market value. A valuation requires a thorough analysis of several years of the business operation and an opinion about the future outlook of the industry, the economy and how the subject company will compete. Read more about determining market value.

Godwill
Goodwill is defined as the characteristics of a business or individual that cause customers to return to that business or person. Goodwill is considered in almost every type of business valuation and clearly contributes to the tangible value of a business.

Sales Agreement
The sales agreement is the key document in buying the business assets or the stock of a corporation. It is important to have an attorney make sure the agreement is accurate and contains all of the terms of the purchase. Read a checklist of items that should be addressed in the agreement.

Financing
It may be important at this time to consider the financing of the purchase. If you have the proceeds in place, then you can proceed to pre-closing activities. If you need to obtain financing, look at options available for loans.