Four Steps to Take Before Buying a San Diego Business
Are you thinking about purchasing a business in San Diego or elsewhere in California? If so, it is essential for you to take some steps to protect yourself and your capital before you close on the deal.
The most important steps are:
1. Find Out Why the Business is for Sale
Before you move forward with a purchase, it is always a good idea to find out why the business is for sale. In most instances, you’ll find that the owner is looking to retire or move into a different industry.
However, in some cases, you might learn that the owner is attempting to offload the business because it’s in financial trouble or losing customers to a more popular competitor.
If you discover the owner has a nefarious reason for selling the company, you can then pull out of the deal or use that information to negotiate a more favorable purchase price.
2. Assess the Value of the Business
You should never move forward with a deal without first making sure the purchase price is fair.
There are three main ways to assess the value of a busines. They are:
- Market Valuation: A valuation based on the selling price of similar businesses in the area.
- Income-Based Valuation: A valuation based on the company’s net income.
- Asset-Based Valuation: A valuation based on the assets owned by the business.
Speak to an experienced California business lawyer or accountant to find out which method will work best for you.
3. Perform Your Due Diligence
With any major purchase, it’s always wise to perform some due diligence. Doing so will ensure you do not run into any costly surprises after you sign on the dotted line.
It’s particularly important to review the organization’s records:
- Real estate holdings
- Zoning permits
- Business licenses
- Bank records
- Tax records
- Liabilities
- Contracts
- Inventory
Be aware: The owner may attempt to rush you through the due diligence process.
Don’t let them. Take as long as you need to make sure the deal is right for you.
4. Negotiate the Purchase Agreement
Once you complete your due diligence, it’s time to negotiate the purchase agreement. You can handle this step yourself, but you are likely to have a better outcome if you allow a knowledgeable lawyer to negotiate on your behalf.
The main points to consider during the negotiation phase include:
- The purchase price
- The payment terms
- The assets included in the sale
- The handover process
- Non-disclosure agreements
- Non-compete agreements
Do not be surprised if the purchase agreement requires a few revisions before all parties are ready to sign on the dotted line.
Your Knowledgeable California Business Lawyer
Do you need a skilled business attorney in San Diego to guide you through the purchasing process? If so, please do not hesitate to reach out to the team at the Semanchik Law Group. We have been helping local entrepreneurs acquire successful companies for years, and we would love to do the same for you!
To schedule a consultation, all you need to do is give us a call at (619) 535-1811 or contact us online. Our friendly representatives will be happy to assist you!
