Ridout Barron


Critical factors to consider before buying a business

In addition to price, other critical questions need to be asked before purchasing an existing enterprise. Entrepreneurs in Alberta who are first-time business buyers might focus on the price alone, not realizing that other important factors must be considered to improve the chances of success. The first question would be for the purchaser to determine how much in personal funds he or she is willing to commit to secure the deal.

The more substantial the personal commitment, the greater might be the purchaser's leverage during negotiations of the final price and the terms. Other finance-related questions include the purchaser's willingness to share control if personal assets must secure a portion of the purchase for funding through vendor financing, mezzanine financing or equity investors. Based on the answers to these questions, will the entrepreneur be willing to give up some level of control of the business, and if yes, how much?

Another factor to consider involves the purchaser's insight and knowledge of the business and its operations. It might be necessary to secure the previous owner's assistance, even if it is only through the transition of ownership. His or her experience and knowledge might be invaluable when it comes to opportunities and potential threats to the business. The previous owner will also help with identifying key employees to retain, and major suppliers and clients.

These are only some of the matters that must be considered along with the price of the business. Entrepreneurs who are new to such negotiations might seek the services of a lawyer who is experienced in the fields of business and commercial laws in Alberta. Legal counsel can also act as intermediaries in the negotiations related to the purchase of an existing business and provide additional support and guidance throughout the legal proceedings.

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Ridout Barron

802 13th Ave SW
Calgary, AB T2R 0L2
Phone: 587-315-8454
Fax: 403-271-8016
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