Negotiating Terms and Sealing the Deal
5 important questions on Negotiating Terms and Sealing the Deal
What are the best valuation measure for small businesses?
- Multiple of Earnings
- Book value
What is book value?
What are important purchase offer contingencies?
- Inspections and due diligence (30 to 60 days)
- Financing
- Noncompete clause
- Limited potential liabilities
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Which steps should be taken regarding income statement inssues (profitability)?
- Have an experienced small-business tax advisor review the company's financial statements.
- Adjust for one-time events.
- Check the owner's compensation.
- Consider how the building expense will change.
- Factor in financing expenses.
- Pay attention to trends. (how are the sales and profits trending? etc.)
Knowledgable buyers are generally willing to pay a higher multiple for favorable trends.
How should one research any legal or tax issues the business may have?
- Look for liens (NL: zekerheidsrechten, pandrechten). Check to make sure that no liens are filed against assets of the business and, if you're buying real estate, that the property title is clear.
- Get proof that all taxes are paid.
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