What Should You Look For in A Contract of Sale?

by 29th of October, 2015

If you've assessed all the options and are looking to sign on the dotted line for a new business endeavour, chances are you'll be well aware that there's a whole host of paperwork to get right. While it is possible to get everything together of your own accord, expert advice is often needed to ensure all of the i's are dotted and t's crossed.

However, there are certainly advantages to be had if you can enter into negotiations with some background knowledge of your own. Consequently, learning a little more about the terms that the business is for sale under is key, and the best way to understand this can be through looking over the applicable contracts.

Assessing the contract of sale

The contract of sale is a document that essentially covers all of the minutia of the business, and signs the entity over from one person to another. What clauses does a favourable one have? Well, research from Business Victoria suggested that you can ensure the business is profitable from day one by setting benchmarks for performance.

For example, some contracts include a clause that specifies the minimum takings of the business over a set period before the reins are handed over. If the company is already in a safe pair of hands and has been consistently profitable, the existing owner may be open to agreeing to this type of arrangement.

Going the extra mile

Ensure that you look over everything! Including property documents, customer lists, sales records, advertising materials and even employee databases. While all of those elements can factor into the overarching contract of sale, you'll be able to get a much better snapshot of the company's prospects if you go the extra mile and put the paperwork under scrutiny.

Professional Advice

Buying a business is a big decision both emotionally and financially. Make sure you have your solicitor, business advisor and account look over the paperwork with you before signing. There may be something you are missing and they be able to point out any issues.