One of the most important considerations of any business activity is cost and the cost to buy a business is no exception. While I have no doubt most people we deal with at VR understand the importance of this simple financial measure we find a number of our prospective (typically first-time) buyers do not have a clear idea of all of the necessary costs involved in buying a business.
With that in mind we’ve created the following worksheet to help you:
Initial Cash is the total cash tendered by the purchaser. It includes cash funding provided by the purchaser as well as bank financing provided to the purchaser and encompasses inventory not included in the sale price.
Existing Encumberances are any liabilities the new owner is assuming from the old. With the exception of payments on capital equipment there is typically very little included here.
The availability of Seller Financing has steadily become more important in recent years and can have a drastic effect on the saleability of a business as well as its final selling price. (See Jey’s article here for more detail.)
Closing Costs are miscellaneous costs involved in closing a deal. The skills of several different professionals factor importantly into this stage of the process and ensure that the interests of both parties are protected and observed.
Startup Costs include licensing fees, and other support activities/costs the new owner must cover in order to complete the transfer of operations to his or herself and ensure the business continues to operate.
If you are a prospective buyer or have any further questions regarding this worksheet or the selling process in general please do not hesitate to contact us at the VR Edmonton Office and one of our friendly, knowledgeable staff will be happy to assist you.
Submitted by Kenji Miki
BUSINESS BROKER ALBERTA 