Buying a business can be a complicated procedure
From finding the right one to working out all the details required for a smooth transfer of ownership.Whether you’ve purchased a business in the past or have absolutely no experience, you should always consider the possibility of hiring an experienced business brokerage office to help you work through the process of finding a business to purchase. Not only will a brokerage office help you find the right business for your needs, but they will also negotiate the entire process from the opening offer to the closing.
However, it’s important that you take the time to read through our explanation of the process. This is to ensure that you understand every step of the process. Even if you’re a veteran that has dealt with the buying and selling of businesses in the past, you’ll gain a valuable understanding of our process that can greatly assist you when working with our services.
Questions That Every Buyer Has
We typically deal with first-time business buyers that are unsure what they’re looking for. Whether they’re in the exploratory phase of the search or have a clear-cut idea of what industry they want to work in, it’s likely that they have many questions that need answering. The first step to any successful business purchase is to find out more about what type of business you’re looking for.
However, we also work with prospective buyers that work for private equity groups, larger corporations or are simply private investors that have a good idea of what they’re looking for in a business. After an initial meeting or phone call with our clients, we will send you a confidential buyer profile that must be completed and returned to us. Once we receive this document, we can start pairing your needs with businesses that we are currently negotiating with.
Here are a couple of the questions you can expect to answer in the document.
- How many days do you plan to work per week?
- Do you prefer working alone, with a small team or a large group of employees?
- What is your current financial strength?
These questions are for the sake of pairing you with your ideal business and also understanding your financial limitations. This will help you save time and a lot of frustration, so it’s vital that you are patient and truthful with the questions we ask.
Once we have engaged in negotiations, we can begin narrowing down the search for an appropriate business for you. Once we reach this point, we can start emailing you confidential summaries or business listing information (BLI) sheets of opportunities that we currently have.
Narrowing the Search
Once you are happy with a few confidential summary sheets, we can start narrowing down the search even more in order to find the perfect business opportunity for you. This is the stage in which you will be exposed to more specific information about the businesses that you are interested in. Before this stage, much of the information is kept confidential in order to withhold the identity of the seller.
Due to the sensitive information being exchanged during this stage, we do require that you sign a non-disclosure and confidentiality agreement. Once these documents are returned to us and we have confirmed your financial capacity to purchase a business, we will then give you full access to a tailor-made confidential business review of the business you are interested in purchasing.
Contents of the Confidential Business Review
In addition to matching buyers with their ideal company, we also work with sellers. This is to ensure that the sellers can continue operating their business while we handle the negotiations and pairing them with prospective buyers. As such, we will work together with you to answer any concerns or questions you have regarding the business before we introduce you to the seller.
This is done in several different ways, but the most important element will be the confidential business review that we help the seller create. The report is designed to give you all the information you need to help you make the right decision. A business review typically contains the following information:
- A detailed description of the business
- A summary of their financial data
- Lease information and other additional business facts
- The number of employees currently working for the business
- Contracts with suppliers and clients
- Future expansion plans that have been set in motion
This document, in addition to our assistance, will give you a thorough understanding of the business, its operations and the audience they appeal to. All of this information will greatly assist you in making your purchase decision.
Meeting the Seller and Touring the Business
If the business review has piqued your interest but isn’t enough to convince you to make an offer, then we can set up a phone call, video call or a face-to-face meeting with the business owner before you make an offer. This is usually the turning point for many business transactions. You will be able to meet the owner face-to-face and discuss specifics, learn more about the business and also the person that currently owns it
Making the Initial Offer
Once you are satisfied with the business and have negotiated enough with the business owner, the next step is to make an offer. This should be seen as one of the first steps to actually owning a business and will bring both you and the seller closer to a conclusion. The business you are interested in purchasing will be a privately held business. As such, you are obligated to make an offer before being given access to the internal financial records.
The buyer must understand that their offer will always be contingent upon the seller being able to prove their representations. Performing due diligence is costly and will take a while, but it has to be done after an agreement on price and terms has been reached. The offer usually comes in the form of an asset purchase agreement, also known as an APA.
Once the offer has been accepted, the next step will be due diligence. You will be asked to put together a due diligence list. This will be a request of items such as financial records, equipment list, inventory, a copy of the lease and so on. You and your advisors will be given a set amount of time to complete your due diligence and remove any contingencies that were listed in the APA. This period is usually between 30 to 45 days. Once your due diligence has been completed and both parties are ready to close the deal, a third-party closing attorney will put together the applicable documents and begin closing the transaction.
The attorney, in this case, does not guarantee that one party gets all the advantages while leaving the other with a poor deal. Their role is to implement the decision that both parties have already negotiated. They will mediate any disagreements that could arise before the deal has closed. The costs of hiring a closing attorney are usually split between both the buyer and the seller. Make sure your own attorney has looked over these documents to ensure that the agreements you negotiated will be reached.
Now You’re in Business
Now that your business negotiations have concluded, you can now be in control of your own future and forge a new career path. Though this may seem daunting, we’ll ensure that we help you every step of the way to give you the best support available and help you find the right business for your needs.
Working With the SBA and Sellers
When purchasing a business, there’s a good chance that will you require some form of financing in order to help you make your purchase. We work closely with all buyers to ensure that can obtain the right financing options for the business they wish to purchase. This usually means that a seller’s note is required and potentially requires a bank loan guaranteed by the Small Business Administration (SBA). Whatever your financing requirements, you can expect us to provide you with the guidance and assistance needed to help you make an informed decision.