Buying Direct

Items to consider when buying a business directly from the seller.

Often business transactions take place where there is little or no representation for both the buyer and seller.  We often see these transactions occur when there is an established relationship between the parties, for instance when a someone buys the business from his or her parent, or a neighbor sells to another neighbor.

This route can often be ideal – there is no or little cost involved in marketing the business to find a suitable buyer, and there is often the initial feeling of familiarity that enables both parties to feel comfortable and confident in the sale.

However, this scenario also has its own shortfalls.  Buyer and seller have agreed to initial terms, but how do they complete or close on the sale?  Have both sides agreed on the steps to take in actually selling and buying the business?  And we all know the saying about familiarity – is a handshake enough? 

The transaction still might need outside help to ensure that both sides walk away from the closing table feeling confident in their decisions.  One major necessity is to still employ a closing attorney to complete the transaction.  This fee is normally spilt between both the buyer and seller.

Additionally, it still may be wise to employ a business broker to mediate the sale and ensure keep other closing items in line – from organizing the proper documentation to scheduling appointments with accountants and lenders.  Having outside, neutral help can often be a deal saver when there a conflict arises between friends.  Ask your business broker if his or her firm offers consultancy services, and what their rates are for mediating a transaction. 

Considering all options before entering into an agreement between close parties may help you to be better prepared and help keep close relations tight.