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Why seek professional advice when buying a business?

Many believe using external help is an unnecessary expense, but consider the costs associated with getting things wrong.

If you're thinking about buying a Canadian business, then you may well be considering how to go about finding an existing enterprise.

This is a critical part of the purchase process, but many buyers choose to shun professional advice in this area and go it alone.

You may hold the popular opinion that using external help is an unnecessary expense, however, it's certainly worth considering the additional costs of getting things wrong.

This ignores the fact that a professional adviser can help you to find specific companies that may be for sale. By opting to hire someone with knowledge of an individual sector, you will, in turn, be gaining access to a wealth of information and contacts.

Contacts

Those contacts can be particularly useful, since many business owners don't wish to publicise the fact that they are looking to sell up. They appreciate that making such knowledge public is likely to lead to a reduction in the value of the enterprise that they are seeking to sell.

A professional adviser is likely to be able to use a variety of channels that simply aren't available to the rest of us. As a result, you may discover opportunities that would otherwise remain hidden from view.

Once you have identified a target business, your adviser will also be able to help with the initial approach to the vendor.

Due diligence 

Before making any business purchase, it's usually recommended that you should carry out a due diligence process. This generally involves examining the existing state of a company and evaluating its current strengths and weaknesses.

As part of the due diligence process, a potential buyer should expect to gain access to a considerable range of documentation and information relating to the business. This will mean that you are able to review accounts for the business, to examine the current cash flow situation and to investigate existing contracts with suppliers and customers.

Due diligence is critical to enabling you to understand the potential risks and rewards that are available to you. It will help you to get an idea of the value of the business.

It's true to say, however, that you may struggle to understand the information that is placed before you. Few of us will have a detailed understanding of accounting practices, combined with the legal qualifications that might be necessary in order to review contracts that are in place.

By hiring professionals to help with the due diligence process, you can be assured that nothing will be missed. You will also be able to accelerate progress, since you won't be the only person who is left to sift through the documentation that's been provided.

Valuation

Opting to make use of those who have particular expertise with the purchase of Canadian businesses and who understand the sector that you are planning to enter can be particularly advantageous. It means that you will be able to get assistance with actually valuing the enterprise that you are considering purchasing.

Such a valuation is useful, helping to ensure that you don't pay more than you need to. It's also likely to give you an element of bargaining power, allowing the vendor to see that you have given full consideration to the market.

Be aware 

It's clear that there are numerous advantages associated with hiring a professional adviser, but you'll need to think carefully about those you choose to appoint. In particular, you will wish to find someone with expertise in the specific sector that is of interest to you.

The level of expertise that's required is also likely to vary, depending upon the size of the proposed financial transaction and the potential complexities associated with the deal. Think carefully about what you require and whether an individual adviser will offer value for money.


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