Buying a business in Florida requires a strategic approach. If a prospective owner fails to identify unforeseen issues before acquiring the ownership of a company, it may result in serious legal consequences.
Keep reading to find out the top five questions to ask before buying a Florida business.
Question #1 – Which Assets Are Part of the Transaction?
When buying an existing business in Florida, you must determine which assets are part of the transaction.
Depending on the terms in the purchase agreement, the company may be sold as a whole or in part. Certain transactions involve only the purchase of the business’s assets or the acquisition of membership interests.
Make sure to work with an expert attorney to negotiate the terms involved in the purchase and draft a solid purchase agreement.
Question #2 – Why is the Owner Selling the Business?
After establishing your purchase criteria, make sure to identify the reason that led the current business owner to sell the company. In many cases, a business owner may simply want to retire or move to a different industry.
However, depending on the motivation behind the sale of a business, it may indicate that:
- The company does not have sufficient profitability
- The company is too expensive to maintain
- Running the company is unusually difficult
- The demand for the company’s goods or services has decreased significantly, or
- Competition is heavily affecting the company
During the research, make sure to talk with employees, vendors, customers, or any individuals who know some background information about the business.
Question #3 – Is the Company Affected by Seasonality?
Specific niches in business are exposed to seasonality. In most cases, certain periods of the year tend to be busier than others. When searching for a Florida company to purchase, avoid businesses extremely affected by seasonality.
Please note that seasonality is not necessarily a liability. Prospective business buyers must research and find out whether a business will make sufficient money during the busy season to maintain its activities in the off-season.
Question #4 – What is the Level of Demand for the Company’s Goods or Services?
Some types of goods and services have a stable demand, while the demand for others may increase or decrease exponentially depending on several factors. When searching for a business to buy, you must identify:
- Whether the demand for that business’s goods or services is growing, decreasing, or stable
- Whether customer demographics are changing
- Whether other similar businesses in the same are opening or closing
- How technology affects the business relevance
- Whether the company needs to invest more in marketing and advertisement
- Will changing trends affect the business demand?
Question #5 – What Obligations Will You Assume When Purchasing the Business?
A business purchase agreement describes not only the assets involved in the transaction but also the obligations and responsibilities of the new owner. If you are searching for a Florida company to purchase, make sure to identify the obligations associated with the agreement, such as:
- The assignment of existing contracts
- Restrictive covenants
- Pending lawsuits against the company
- Judgments against the company
- Unpaid or unsettled debts
- Tax liabilities