That process is described further later in this entry.
Evaluation of a business is central to price negotiations later and must be carried out with care and diligence in order to avoid legal and financial problems later.
Initial homework consists of exploring the industry or specialty that looks most suitable to the talents and experience of the buyer.
A part of that homework is to learn the going price for different types of enterprises.
If the buyer has no business identity, the seller will usually ask for references and not make financial disclosures beyond those advertised until the buyer's status and net worth have been carefully checked.
Business Plan For Buying An Existing Business Target Market Business Plan
In the normal course of events several contacts will take place before the buyer can obtain information sufficient to study the targeted business closely.Buyers rarely set out to buy into altogether unknown industries, but they may not know the business at its highest levels.For example, a person may know a business from an operational but not from a marketing point of view—or the reverse. Sellers of businesses will advertise themselves or engage the services of a business broker.Assuming that the evaluation has produced satisfactory results, negotiations may become necessary to resolve remaining open issues.These can take many forms and may deal with just about any aspect of the business, from the handling of certain liabilities to employment contracts for key employees or executives.Eventually a purchase agreement will be drawn up, usually involving legal professionals, and the purchase finalized with signatures and transfers of funds.The evaluation of a business can be divided into four clusters: the seller's history and motivations, legal matters affecting the operation, the financial status of the business, and the condition and prospects of the business in its market (its products, services, and future).The motivations of buyers and sellers are essentially the same.Each wishes to establish the qualifications of the other—and the buyer must therefore be prepared to give as much as he/she gets, namely to display his or her abilities to buy the business.Examples of sites, including one that advertises businesses for sale directly (cityfeet Biz) and of brokers (United Business Brokers, serving cities in Utah, Nevada, California, and Idaho), are provided in the references; there are many more.Once contact has been established with a candidate, a process of mutual exploration begins, usually with a visit to the candidate's place of business where, following a tour of the place, preliminary discussions begin.