We all would have seen signage citing “Business for sale”. It could be across any sectors, across all industries. Growth for a company in any industry can come from only two sources. One is organic growth, where the company uses its products to build up more customer base and in turn, generate more revenue. There is the other source of growth, or the inorganic growth mode. Here companies buy up business for sale and expand their product portfolios. This too could lead them to generating higher revenues. Mentioning below are the important checks that should be made while considering buying a business that is for sale:
1. Stock: This refers to all products and stuffs stored for resale. You or your qualified representative must be present when these businesses for sale are clearing up their inventory. You should understand the position of stock, what’s on hand and what was in stock at the end of the last financial year and the one before that. Have the stock appraised. This is a firm asset and you need to know the value to assign it. You could bet a bank such as a Massachusetts bank to value the business. Also, check the how old is it? Its quality, condition etc! Affirming the value often inventory is a subject of negotiation.
2. Furniture, equipments and structure: This encompasses all products, equipments and assets. Get a listing that accepts the make and model number of each equipment. Then determine its present shape, market value when purchased versus present market value, and whether it was bought or rented. Learn the changes you have to do to the structure or layout so as to suit your needs.
3. Contract copies and legal documents: These legal papers must include all hire and purchase agreements, distribution arrangements, subcontractor agreements, sales and union contracts, employment agreements and any other instruments that can lawfully hold the transferable business. All real estate papers if you are considering taking his land for a lease. Find out whether it is transferable, etc.
4. Financial statements for the past 5 years: Evaluate these statements, taking on all records and financial records. This is very important for learning the earning ability of the business.