In 2017 I saw a substantial increase in existing businesses being acquired by a new owner. In comparison, I saw comparatively few new businesses being started. Based on what I observed, seasoned and successful business owners were at or near retirement age, had made their money, and considered the market print to sell. On the other side of the transaction, usually, the buyers were not new college graduate age, but not near retirement either, had some experience in the workforce, and had a good idea on how business runs (but not necessarily on how to run a business).
After looking at the transactions I was part of in 2017, I offer these MUSTS for you and your commercial purchase agreement:
- Correctly identify the parties.
- Get all the sellers' financials, in particular, their obligations, to make sure title will pass.
- An exhaustive list of the assets being acquired.
- An accountant to help prepare for the tax consequences (true for both the buyer and seller)
- Clearly written terms expressing what each side must do and by when.
These principles hold true regardless of whether you're buying a machinist factory in Hugo or a commercial property in White Bear Lake. Getting these elements in place does not guarantee success, but it sure it is a good start to avoiding problems.
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