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Basket purchases involve buying a collection of assets at a lower price than buying them separately. The cost of each asset is allocated based on fair market values with a discount. This strategy is used in various business transactions, such as buying property, equipment, and raw materials. The seller benefits from fewer transactions, while the buyer saves money.
Also known as lump sum purchases, basket purchases are purchases that involve a collection of assets rather than the purchase of a single asset. This approach often results in the ability to purchase multiple assets for a lower price than would be possible by purchasing them separately. With a basket purchase, the cost of each asset in the group is typically allocated based on current fair market values and applying a discount as part of the incentive to make the one-time purchase. The use of the basket buying strategy is common in a number of business transactions, with the idea used by retailers, service providers, realtors, wholesalers, and virtually any type of sales situation.
As an example, a basket purchase for a business may involve several different assets that must be acquired in order to fully acquire everything needed to remain in operation. The agreement may require the purchase of the property where the business is located, in addition to a warehouse located in a separate part of the property. At the same time, the equipment used to produce the goods must also be purchased. The prospective owner may also want to purchase the raw materials used in production, especially if the idea is to continue operating the facility throughout the procurement process.
Rather than purchasing each of these assets separately, the owner provides the buyer with a fixed amount or basket purchase price to acquire all the required assets in one single transaction rather than initiating a series of transactions. In exchange for purchasing all assets as part of a transaction, the owner also grants a small discount off the market value of each asset included in the purchase. This allows the buyer to save a considerable amount of money while still purchasing everything needed to continue the operation.
The idea of a basket purchase can be applied in any number of different settings. Individuals who are selling household items such as furniture can offer potential buyers discounts if they commit to purchasing a dining room suite along with the living room suite. Likewise, companies offering multiple types of communication services may employ what is known as bundling, which is simply a bundled purchase of two or more services in order to obtain a lower overall price for those services. In all applications where a basket purchase is made, the seller has the benefit of moving products with fewer transactions involved and the buyer has the advantage of obtaining desirable products at a lower price than buying those same products individually.
Asset Smart.
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