In Business Law


          When buying and/or selling a business, countless questions abound for the buyer and seller. The following questions help ensure that the parties know what they are getting into and to help the process run smoothly.

          1. Considerations for the Seller during the sales process:

          Should I sell?
          When should I sell?
          To whom should I sell?
          How can I find a buyer?
          Who should be involved in the sale?
          How much is it worth?
          How much information should I provide to the prospective buyer?
          Will the prospective buyer be willing to raise his offer?
          What payment terms should be used?
          Could I have gotten more money?
          Should I have asked for more money down?
          Will this price be fair to the buyer?

          2. Considerations for the Buyer during the sales process:

          Should I buy this business?
          Why is this business for sale?
          • Personal reasons?
          • Economic reasons?
          • Poor management?
          • Inadequate cash flow?
          • Insufficient capital?
          • Need to grow with infusion of capital?

          Is the seller sufficiently anxious to sell?

          Will the seller negotiate?
          Will the seller provide for a favorable buy?
          What are the payment terms?
          What has been the past record of performance?
          What is the future potential for the business?

          3. Necessary items for an optimum sales transaction to occur:

          The business should pay for itself, over a reasonable time, out of its profits.
          The buyer is entitled to a competitive salary for that industry and locale.
          The seller, on financing, should receive interest equal to prevailing rates.
          Expecting that an all-cash deal rarely occurs.
          The seller should normally be allowed to make a profit on the sale.
          The buyer should have growth potential.
          The business should have growth potential.

          4. Financial concerns of the Buyer:

          What is the firm’s cash position?
          What are the future cash needs?
          What is the future cash potential?
          How much cash does the purchaser have?
          How much initial cash will be needed?
          What additional cash sources are available?
          Have the firm’s profits been satisfactory?
          Have the profits been consistent?
          What is the profit trend?
          What are the key reasons behind the profits?
          What sales can currently/in the future be expected?
          What is the firm’s growth potential?

          Does the business have a solid customer base?

          Will key employees remain after the sale?
          What factors are most important concerning cost of goods?
          Are material costs in line with industry averages?
          In what condition are the assets, especially the productive equipment?
          What factors may affect sales of the business?
          What financing plan should be considered?
          What is the reputation of the business and its management?
          Does the business have a good location?

When decision has been made to sell or buy a business, it is recommended that you contact your attorney or retain a good attorney to assist with the process.  

 The foregoing checklist, adapted from Small Business Planning (West Group), authored by Westlaw, © 2014 Thomson Reuters.