Business Buying 101-Step 9-Physical Assets

Business Buying 101-Step 9-Physical Assets

When buying a business, inspect the premises. The building’s condition and any accompanying equipment or machinery are included. A comprehensive inspection will help you detect any maintenance or repair concerns and equipment that may need to be replaced soon.

In addition to the business’s physical health, its placement relative to competitors is crucial. Competitors can affect a business’s capacity to attract customers and make money. Consider the local competitors and whether the business has an advantage or disadvantage.

Walk-in visibility is another consideration. High-traffic, visible businesses can draw more consumers and make more money. Consider foot, vehicle, and parking traffic while choosing a business location.

When buying a business, consider zoning compliance and variances. Make sure the firm follows local zoning requirements. If you buy the business, make sure any variations will stay in place.

When buying a firm, environmental standards are crucial. To guarantee compliance with rules, analyze the business’s hazardous substance usage and disposal history. To avoid future corporate liabilities, examine any prior infractions or environmental issues.

When reviewing and verifying all physical assets of a business, it is important to create an inventory list and determine the current market value of each item. Some physical assets that may need to be considered include:

Equipment:

This includes all tools, machinery, vehicles, computers, servers, and other equipment that is necessary for the operation of the business. Does the business own the servers and other internet equipment or just rent them? Many times, the selling business owner may not even realize they are renting and that they do not own them.

Inventory:

This includes all products, goods, or materials that the business holds for sale, use in production, or as raw materials. A review of inventory can identify obsolete inventory, slow-moving inventory, and valuation methodologies for inventory.

Furniture and Fixtures:

This includes all desks, chairs, tables, shelving, and other furniture that the business uses in its operations.  It is common the business seller will want to have the buyer pay more than a depreciated value.  The buyer may need to provide documentation of an expected similar price for a larger piece of equipment by showing active listings of similar products in order to negotiate the FF&E lower.

Real Property:

This includes all land, buildings, and other structures that the business owns or leases. It is important to verify the title, appraisal, and legal documentation for all real estate.

Leasehold Improvements:

This includes any improvements or modifications that the business has made to leased property, such as adding partitions, painting, or installing new flooring. Unless the business for sale is a highly sought after location or business type, it is typical for a seller to expect to get only 35-40% of the original investment in the leasehold improvements.

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