Buying a Small Business – Points to Consider

As a consultant, Ashu Bhandari has advised numerous clients in the purchase of local small businesses. Community minded, Ashu Bhandari offers these and all other consultancy services free of charge.

Before buying a small business, an investor should first understand the value inherent in the purchase. The buyer may be intending to operate the business, sell it, or liquidate its assets. Buyers who are planning to liquidate can more easily assess the value of the business’ physical assets, but those who would like to operate the business or sell it have a more difficult task at hand, as these buyers need to know how much revenue the company generates and if it turns a profit. Buyers who intend to operate the business should use this information to assess whether the purchase can provide them with acceptable compensation while also earning an additional profit.

Experts also suggest that buyers approach brokers or other professionals for advice. Outside consultants can help a buyer identify potential risk and advise on how to structure an arrangement to mitigate that risk. After performing additional due diligence, a buyer can approach the seller with proposed financing terms and purchase contingencies.