Buying a new business is more complex than buying a property and there are many factors that contribute to a business’s value and hence a fair purchase price. An experienced New Jersey business transactions lawyer can help you examine factors to determine if the business you want to buy is fairly and properly priced.
Where to start
In researching a prospective business you should cover a few basics including:
• Research the selling price for similar businesses in the last one-two years
• Determining the main value drivers for a business in that industry such as:
o Who buys the products or services of the business
o If the business is local, who are the customers and what is the demographic makeup in the area
o If systems are in place that drive commerce from the business’s public
• Look in your area for a business appraiser who can help you value the business
• Determine the earnings before interest, taxes, depreciation and amortization (EBITDA)
• Research industry trends for the type of business you are considering purchasing.
Questions to ask
In addition to the above you need to thoroughly question the owner/seller and his or her employees, about:
• Why the business is being sold?
• How many hours does the owner put in weekly?
• How many hours would you as the new owner need to put in weekly to succeed?
• Who is the competition and is there any new competition you should know about?
• Any suggestions they have for growing the business.
• Are the current employees willing to stay? If so, who are the key/best employees who could help you grow the business.
• Does the business require any improvements immediately?
With the assistance of your business attorney you want to get the clearest picture of the state of the business as possible in order to determine whether it is a good investment for you.
Get advice from an experienced New Jersey business lawyer today
Buying a business is a big step and should not be rushed. An experienced lawyer can help you get the answers and information you need to make the right choice. Contact us online or call 856-235-4079 today to discuss the business valuation process.
