What to ask your business partner before a business sale or acquisition
When buying or selling a business with a business partner, you must agree before making any major decisions. Ask your business partner from the get-go about what they believe makes a successful business sale or acquisition, the factors that are important to them and any dealbreakers, so you can move forward with these considerations in mind.
The Selling My Business team advise on what questions to ask your business partner before buying or selling a business so the transaction can run smoothly.
What’s the end goal?
Although all business partners may share the same goal; selling a business or buying a business, they may also have set conditions. From finding a buyer with a similar skill set to ensure that there’s no skills gap, to buying a business that owns or leases commercial property of a particular specification - each partner will have their preferences.
This must be negotiated and agreed upon at an early stage, so a business transfer agent can understand how much flexibility to allow when securing either a buyer for the business or a business to buy.
- Previous sales and acquisitions experience
- Sector specialisms and average success rate
- Sales value expectations and growth potential
Considerations before buying or selling a business with a partner
To reach the desired end goal, a business partner may have a list of prerequisites for the sale or purchase. From releasing a minimum return from their investment, snapping up commercial property or closing the sale under a strict timeframe, here are some questions to ask your business partner before buying or selling a business together.
- Sale price – In the event that a compromise can either make or break a sale, what’s the minimum price that business partners would be willing to shake hands on? This will largely be determined by the market value of the business and how much business partners are expecting to generate from the sale of the business.
If buying a business, what’s the most business partners are willing to pay if a competitive opportunity enters the market? A business valuation calculates how much a business is worth and provides clear guidance on what’s a reasonable sale price and what’s inflated.
- Business buyer background – The professional qualifications, experience and skill set of the business buyer will determine whether they are a suitable match for the business. If a skills gap will hinder profitability, it may be essential to find a buyer that mirrors the same skill set as yourself.
If the business is in a niche industry, the skill set of the business buyer will be a crucial mitigating factor as they will require a thorough and proven understanding.
- Business assets – Are all company assets that make the business up for sale? If this includes property, is the property freehold or leasehold? Some business owners may choose to sell part of a business and hold on to certain business assets that contribute to the face value of the business.
- Vision for the business – If you are buying a business with a business partner, do you have a shared vision for the future of the business? What are the next steps?
- Timeframe – If a business partner is under a tight deadline, they may wish to seal the deal within a certain timeframe. This could be because they’re approaching retirement, wish to release the funds from their investment to fuel another business venture, or have other commitments to turn their attention to.
- Red flags – Are there any concerns or red flags that you must be aware of before you set out to sell or buy a business with a business partner? Perform due diligence so you can understand who you’re getting into business with including their relationship with money and attitude to borrowing.
Each factor will vary in importance for each business partner. Where one may prioritise the qualities of the business, another may feel that the background of a business buyer holds greater value.
For more information on planning to buy or sell a business, speak with a business transfer agent at Selling My Business. Founded in 1965, we have 60 years of experience in advising business owners on business sales, business acquisitions and business valuations.