When you want to buy or sell a business, there’s a lot to consider. As someone with more than 33 years’ experience in the banking sector, BizSmart Core Advisor Ian Priest is well placed to talk us through the different elements of a deal.
If you want to buy or sell a business then there is a lot to think about. In Ian Priest’s latest webinar he goes through some of the most important elements of this transaction, helping you to avoid the pitfalls.
If you’re buying a business then you’ll almost certainly need to look into how you’re going to finance this purchase.
If you’re selling a business this will take you through how buyers can fund the acquisition and the options you may want to consider as a vendor.
Whether selling or buying, the decisions you make during this process can have a major impact on you. Therefore, it’s important to understand the best scenarios and be prepared for challenges that may arise.
The terms you agree to, as part of the deal you make, will involve a greater or lesser degree of risk to the buyer and the seller. You both need to agree to terms that you can live with. Your individual approach to risk is important here.
Shares or assets?
As a buyer the best place to be is to be buying assets, and as a seller the best option for you is to be selling shares.
Before you start looking at how to raise finance to acquire a business, the first question you need to answer is, “Have you got the skills, knowledge, experience and track record to be able to run the business successfully?” Don’t move forward with the acquisition if you have serious doubts over your ability to do this.
How to raise finance
First look at what you can bring to the table yourself.
You may have:
- Equity in property you can release
- Friends and family that want to invest
You need a good stake. The banks call this “hurt money” – it needs to be at least a year’s salary. This is deemed a sufficient amount of money that you won’t throw in the towel too easily because it would hurt to lose that amount of cash.
Can the vendor help you fund the purchase?
How much of the purchase price of the business has to be paid on day one, and how much can be deferred – paid over three to five years?
There will be potential to raise funding out of the business you are buying. This can scare vendors – they are leaving money in the business and seeing the assets of the company being pledged as the security.
To find out more about the different ways you can fund the purchase, including with company assets and borrowing against future profitability, and to understand more about forecasts and due diligence, listen to Ian’s webinar here. [ADD LINK]
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