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The Financial Review Buyers often expect to see detailed financial information before making an offer, however sellers do not want their financial information available to anyone that is not a serious buyer. We have found that the few times buyers insisted on this they wasted a lot of time analyzing the books, only to find that they couldn't agree with the seller on price and terms, or that the type of business just didn't suit them. If a potential buyer only has $50,000 for a down payment and the seller has decided there is no way he will take less than $80,000 down, there is no way there will ever be a meeting of the minds so there is no need for this potential buyer to see the books & records. This is good for the new buyer as well as for the seller because it is not good business for your businesses financial health to be widely known. Once we have an offer and acceptance (with a contingency upon buyer's approval of seller's books and records clause,) you and your accountant then have access to tax returns, register tapes, P & L's, sales tax records etc. to verify the facts and figures. The financial review need not be complicated, but the process does generate questions from buyers and sellers. Some typical questions from buyers are: Verification The buyer has the opportunity to check out the books and records of the business that supports the information initially disclosed through the listing of the business. If the buyer is satisfied with the information provided, the buyer releases the financial contingency and proceeds to the next contingency. What is the time frame? This depends on the individual and the business. Many businesses can be checked out in one meeting. While more complex businesses can take longer. It is customary to provide a limited amount of time for the buyer to review the information before the contingency is resolved. Otherwise, if the buyer takes too long to review the information, the buyer may become disinterested in the business or the information reviewed may become obsoleted. What if the information was not correct? The contingencies in the offer have to be met to the buyer's satisfaction. If not, you have the right to make a different offer, cancel your offer and get your earnest money refunded, or look at another business.
Buying a business |