Buying or Selling a Business: A Checklist

Witzke Berry Carter & Wander has been a strong supporter of Mac-OU INC for quite some time now, and John Carter’s Lunch & Launches are always great informational vehicles for attendees. With John unable to present yesterday, Andy Goldberg stepped up to the plate, with positive feedback from all attendees. If you missed it, check out some additional information below, courtesy of John Carter. – Joan Carleton, Marketing & Communications Manager, Macomb-OU INCubator

If you are preparing to buy or sell a privately owned business in Michigan, there are certain things you will need to do before you sit down to sign the agreement.

  1. Identify potential sales partners. For sellers, look for potential buyers in your contact circles, raise your company’s visibility, and consider hiring a business broker to seek out buyers for you. For buyers, decide what kind of business you are looking to buy and seek out brokers or listings for that type of business. Remember that brokers work for the sellers, not for you.
  2. Pick your deal team. Both buyers and sellers will need some power in their corners during the negotiations stage. Reach out to a business lawyer, tax expert, financial planner, and possibly a sales consultant or human resources consultant to make sure you understand what is being bought or sold.
  3. Set a price range. The best way for buyers and sellers to agree upon a reasonable price for a business is to use an independent business appraiser. An appraiser can establish the value of the company’s assets and help determine the market value of the company. You can also ask the broker to give you the comparable price of similar sales, but given the variability between businesses, this method is less accurate and less objective.
  4. Do your “Due Diligence.” If you are a seller, get your books in order. Obtain copies of all your important documents including licenses, leases, customer contracts, consultant contracts, employee policies, and financial statements. You may want your attorney or accountant to create a summary of the financial state of your business as well. If you are a buyer, take the time to review all the important documents of the business. Be sure you understand the company’s cash-flow situation and obligations to third parties. If you have questions, ask them early rather than discovering the problems after the contracts have already been signed.
  5. Look out for “Deal Killers.” Identify any substantial liabilities the company might have like outstanding lawsuits, environmental problems, outstanding tax liabilities, or customer dissatisfaction. If you are the seller, try to resolve these issues before sale. If you are the buyer, make sure that the seller remains liable for these “deal killers” if you discover them after the sale.

Buying a business is often the single biggest purchase a person will make in his or her lifetime. The sale of a business is just as large a life-event. Make sure you take the process seriously and are prepared when you sit down to negotiate. An experienced mergers and acquisitions lawyer can help walk through the process and draft the eventual purchase agreement. For more information, call attorney John Carter at 248-481-4000 for a free consultation.

John Carter
Witzke Berry Carter & Wander

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