Purchasing a business can be a complex and challenging task. A purchase involves several steps, each of which needs to be done well:

• Find out about the business, assemble information
•  Calculate how much the business is worth as it is
•  Estimate how much the business is worth to you
• Decide whether you even want to purchase the business
• Manage the offer and negotiation process to reach a settlement to purchase
• Complete the purchase, take over ownership and control

The information stage is referred to as a due diligence investigation. Its principal objective is to find out about the business so that you can calculate what it is worth and even whether you wish to purchase it at all. The secondary objective of due diligence is to get the information needed to secure legal protections in the purchase. For some type of purchase you will be able to include conditions on the purchase contract, information from due diligence will be used in designing these conditions. For example, you might require that everything to do with specified or past legal actions or liabilities remain with the vendor or you might require that trademarks, logos and intellectual property formally become the property of the business and so continue to be available to the business under your ownership.

Calculating the value of the business is an essential part, and probably the most important part, of the purchase process. At least two values are needed – the value to the present owner and the value to you, the new owner. The value to you allows for the improvements that you will make to the business.

Based on these values and also allowing for any potential problems and risks that you discover in the due diligence investigation, you will decide whether you wish to pursue the purchase at all. If the business is worthless or if there are too many adverse risks then it may be best to walk away, not even to bid for the business.

If the business does look attractive though, you will then want to formulate a negotiating strategy. This will start with the price you wish to offer and, if it is possible to attach conditions to the purchase, what these conditions are. You will want to know at the outset what is your limit price, the price that you will not exceed no matter what. You will also want to have your negotiating tactics worked out ahead of time. Only when all this strategy has been worked out will you want to move into the actual offer and negotiating process with the vendor.

The final stage involves the formalities of the settlement, the completion of purchase and sale contracts, and your assumption of ownership and control.

Each of these steps repays careful preparation and careful execution. The E-DEC business transaction software products provide the methodology needed for a careful, thorough and effective purchase process. The legal specifics are a job for your legal advisor. The economic aspects of the purchase are all covered by the e-dec Purchase Strategy software.

e-dec Purchase Strategy software lets you address these vital questions; provides clear and expert advice and answers as you proceed through the purchase and sale process.