Learning more about a business can prevent a bad deal

07 Oct, 2019

On Behalf of Mack & Mack Attorneys | business law

You might have found the perfect business to purchase in South Carolina and you do not want it to get away. While it is understandable to secure a good business operation if you can, rushing to give the seller an offer in writing might not be the way to go. If you find out new information about the business that gives you pause, it can be a hassle to withdraw your offer or modify it.

Forbes explains that written offers can be complicated to retract if you find new information that necessitates changing the offer. You may end up dealing more with the attorneys representing the seller than with the seller personally, which can drag out the proceedings. Also, sellers might hold up the sale if they object to something in the offer and want it changed. Sometimes sellers do not understand the language in the offer, which will also take time to clear up.

To prevent as many delays as possible, holding meetings with the seller or talking matters over the phone is a preferable course. Engaging in more conversations before making an offer can help you get a good feel for the business you want and how it works. The seller also has an opportunity to work out matters with you directly. You also can ask the seller questions, such as how the business is valuated.

This is also a good stage to look for anything wrong with the business. Sometimes red flags do not show up until after you have made an offer. An article in Forbes points out that conducting due diligence might reveal problems with a business. For example, a look at cash flow could uncover mismanagement or fraud. Even if there are no illegalities involved, due diligence may still reveal issues with the profit margin of the business and the potential for future profitability.

Putting off a written offer to buy a business so that you can learn more about the operation could decrease the likelihood that you wind up with a bad deal. Consulting with a knowledgeable attorney who understands the legal issues involved with purchasing or selling a business can also help avoid possible pitfalls.

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