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?

  1. Multiple of Earnings
  2. Book value

What is book value?

The book value of a company is the company's assets minus its liabilities, which is the same as the net worth of the business as stated on its balance sheet. The figures that go into determining book value should be checked carefully to ensure that the underlying asset values and liability accounts are correct.

What are important purchase offer contingencies?

  1. Inspections and due diligence (30 to 60 days)
  2. Financing
  3. Noncompete clause
  4. Limited potential liabilities
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Which steps should be taken regarding income statement inssues (profitability)?

  1. Have an experienced small-business tax advisor review the company's financial statements.
  2. Adjust for one-time events.
  3. Check the owner's compensation.
  4. Consider how the building expense will change.
  5. Factor in financing expenses.
  6. 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?

  1. 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.
  2. Get proof that all taxes are paid.

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