What You Need To Know Before Buying A Company

Buying and selling businesses is not something you do without significant forethought and planning. Adding another business to your company can be extremely beneficial and allow you to grow your business quickly. Before you merge two businesses, whether they’re startups or large corporations, there are several things you should consider.

If you’re considering buying a company, study their financial situation thoroughly first. Buying a business is similar to making an investment so you want to make sure your investment will be financially beneficial in the future.

(Curated from Tech.Co)

“Accounting policies can be the difference between a company that looks financially viable upon paper, and a business that is in reality sinking without hope of salvation. So be sure to consider the company’s accounting policies upon: revenue recognition, accounts receivable and inventory detailing.”

Another important thing to consider before buying another business is whether your purchase will include intellectual property. For example, if the company being sold has copyrighted products or information, you should consider that a beneficial asset.

“Technological or intellectual property can be of significant worth within an acquisition and is important for the integrity of due diligence according to Aperio-Intelligence so ask:

• Does the company have either domestic or foreign patents?
• Does the company own any copyrighted products, materials or trademarks? And do they all belong solely to the company?
• Conversely you should ask whether the company is infringing on another’s intellectual property, and whether there may be litigation on the horizon.”

Two other aspects of business you should keep in mind before buying are debts and contracts. A business with significant debt might not be a good investment. You should also take any standing commitments the company has made into account. Employee contracts or supplier contracts could benefit you in the future or become a financial burden. Essentially, before you buy or sell a business make sure you do your homework. You want to make sure that you’re doing the right thing for yourself, your coworkers and your company.

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