Process of evaluating an existing business
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This document outlines the key steps in evaluating an existing business for purchase: 1) Determine the owner's reasons for selling and the physical condition of the business assets and records. 2) Analyze the potential for the business' products/services by researching customer characteristics, composition and competitors. 3) Consider important legal aspects like liens, bulk transfers, contract assignments, covenants not to compete and ongoing legal liabilities that could be inherited. 4) Evaluate the financial soundness of the business by assessing strengths/weaknesses, responsibilities, costs, employee impacts and conducting proper due diligence.
Process of evaluating an existing business
- 1. PROCESS OF EVALUATING AN EXISTING BUSINESS AHMAD RUSHAIDI B AZMI 62283113781 NURFARHANA BT AMINUDIN 62283113723 NUR HAFIZA BT AB HALIM 62283113541 FARAH AINI BT ZAINOL 62283214371 NUR INSYIRAH IZYAN BT NOORISHAM 62283113898 NOR HAZLINA BT KAMARUDDIN 62283313057
- 2. PROCESS OF EVALUATING AN EXISTING BUSINESS Why does the owner want to sell? What is the physical condition of the business? What is the potential for the company’s product or services? What legal aspects should you consider? The business financially sound?
- 3. WHY IS THE BUSINESS FOR SALE? • Look for the real reason • The owners feel boredom and burnout • The owner decide to cash in their business investment and diversify into other types of assets • The buyer should be able to develop a clearer picture of the business and its real value
- 4. WHAT IS THE PHYSICAL CONDITION OF THE BUSINESS? • Account receivable • Lease arrangement • Business records • Intangible assets • Location and appearance
- 5. WHAT IS THE POTENTIAL FOR THE COMPANY’S PRODUCT OR SERVICES? Customer Characteristic And Composition • Discovering why customers buy from the business and developing a profile of the entire customer base can help the buyer identify a company’s strength and weaknesses Competitor Analysis • A potential buyer must identify the company’s direct competition, those businesses in the immediate area that sell similar products or services
- 6. WHAT LEGAL ASPECT SHOULD YOU CONSIDER? • Business buyers must be careful to avoid several legal pitfalls as they negotiable the final deal. • The biggest potential traps include liens, bulk transfers, contract assignments, covenants not to compete, and going legal liabilities.
- 7. What is it LIENS? The proper transfer of good title from seller to buyer What is it BULK TRANSFER? To protect against surprise claims from seller’s creditor after purchasing a business. What is it CONTRACT ASSIGNMENTS? A buyer must investigate the right and the obligation he would assume under existing contract with suppliers, customers, employees, lessors, and others.
- 8. •Generally by signing a covenant not to compete, an employee agrees that if she leaves the employer, she will not go to work for the employer's direct competitors. •Covenants not to compete are also known as "non-compete clauses." COVENANTS NOT TO COMPLETE • These typically arise from three sources; •Physical premises • Product liabilities claims • Labor relation ONGOING LEGAL LIABILITIES
- 9. THE BUSINESS FINANCIALLY SOUND? • How to assess the strengths and weaknesses of potential business options including any responsibilities or liabilities you will inherit from the previous owner. • Why the current owner is selling and how that may influence your decision to buy. • The additional costs that will be incurred if you decide to buy the business • How and when to consult with existing employees about your future plans. • What Transfer of Undertakings and Protection of Employment (TUPE) Regulations are and how they might affect your future plans. • What due diligence entails and where to get assistance to manage the process. • The conditions of sale and all your contractual responsibilities