Buying a Business - bizbrokersusa.com

Buying A Business

Here is an example of what you can expect as you move forward in purchasing your business.

A). Overview: Perhaps the most important attribute you should possess is the love of what you do. It makes absolutely no sense to do something you dislike. Here’s what we mean. Let’s suppose that you come to us wanting to purchase a supermarket. You see everyone telling you what a great business it is and above all how much money you can make. That’s wonderful. Here’s the problem…you love automobiles. As a matter of fact, you went to school to be a mechanic. You love working on cars. How can you possibly be happy running a supermarket? You know very little about it, you weren’t trained for it, and you don’t even know if you like it. You just can’t mix apples and oranges. Do the thing you love to do and success will follow.

B). Education and Self-Assessment: In order for you to be successful, you need to have two important tools. The first is an adequate knowledge about the business. The second is the funding to purchase and maintain the business. Most businesses will fail if either of these two items are lacking. You should have a clear understanding of the financial risk involved and your strengths once you own the business.

Before you decide to go into business, you should make certain you do a few things.

i). Learn how the process of purchasing a business takes place.

ii). Make certain you have the actual down payment and remaining funding in place to follow through with the purchase.

III). Seek out businesses that fit your knowledge, desire, background and your talents.

C). Initial Consultation: In our initial consultation we work with you by gathering information. We will be discussing your skills and experiences, personal goals and above all your financial capabilities. This information is kept strictly confidential. It will assist us in the acquisition process. More importantly it will assist us in validating your commitment and competence. The seller will want to every assurance that you are in a position to make the deal. The lender will want to know your background and ability to repay any financing that may be required. The attorneys and accountants will want to be certain you are well informed throughout the entire process. These people will be a part of the process and will require personal and financial information from you.

D). Review and Evaluation: Before we discuss the confidential information about the business, we need to do a few things up front. First, we need to determine that you have the physical funds to make the acquisition. That means if you are looking at a business we have for sale for $500,00.00, you should be able to show us that you have sufficient assets to make this type of purchase. If you are only coming to the table with $25,000.00 and that’s what you are working with, we won’t be able to show you the business that is selling for $500,000.00. However, you may have other assets you can use to secure a loan to obtain the business. The second important item we need to cover is a form we call a Confidentiality Agreement. This is also known as a Non-Disclosure Agreement. This agreement, once signed by you protects the seller during the sale process. In a nut shell, you are agreeing not to disclose any information supplied to you regarding the business you are contemplating purchasing. Based on what we discuss, we will review the business we have available for sale that may fit you needs. If you have an interest in any of the business, we will provide you with an overview of the business, (a profile), that gives you the basics of the business, the current financial conditions, the overall market today, the price and terms of the offering and the future potential of the business.

E). Meeting with the Seller and Examining the Business: Once you have had an opportunity to review the information we shared about the business, the next step is meeting the owner and visiting the business itself. We schedule all the appointments with the seller. We attend the meeting with you at all times. Often times this examination of the actual business takes place when the business is closed. The reason for this is that the seller does not want employees to have any inclination of a sale so that they fear losing their job.

At such time at you meet with the seller, you will have the opportunity to ask questions regarding the operation of the business. It is not appropriate to discuss the sellers price, terms or conditions at these meetings. These items are presented during the actual negotiations surrounding the offer to purchase. We are the liaison between you and the seller.

Again, beware, you signed a Confidentiality Agreement. Only discuss information about the business with your professional advisors and spouse. You are responsible to remind them that the information you have is confidential. In most cases, the employees, customers, suppliers, landlords and lenders are not aware that the business is for sale. If you prematurely disclose this information it will have a negative effect on the business being sold. You could be liable for damages as a result of your non-adherence to the Confidentiality Agreement.

F). Making an Offer: At such time as you have reviewed the financial information, inspected the business and had discussions with the seller, it’s time to make an offer to purchase the business. Before we prepare an offer with you we will take time to review all the information we have available to make certain you have a clear understanding of the business you are purchasing. At this point we will require a deposit also known as Earnest Money Deposit. This deposit is held in our escrow account. Our policy is to retain a minimum of 10% of the total selling price that represents your commitment to purchase. The seller does not get the deposit unless the deal closes. If real estate, a lease, or assumption of lease is required, we will prepare a separate contract for that matter. In that case, an additional deposit for real property will be required. (All contracts are subject to the buyer and seller attorney approval usually within a few days time).

G). Due Diligence: At such time as the offer to purchase has been signed by the buyer and seller, it gives you the opportunity to perform your due diligence. Usually, depending on the business, this can take a few days or in larger businesses a few weeks. We will coordinate your request for documentation and arrange for meetings between the attorneys, accountants, landlords and lenders. You now have the opportunity to review the financial documentation, operating agreements, leases, receivables, payables, employees, franchise agreements etc. During this time, it allows both parties to remove any outstanding contingencies relative to your purchase offer. Should financing be required, it allows you the opportunity to arrange for the same.

H). The Closing: At such time as you have competed your Due Diligence and all contingencies have been removed or agreed to, we will schedule the closing. Normally, the closing date is incorporated in the offer to purchase. Your attorney will obtain a “condition of good standing” if you are purchasing a corporation from the State. Otherwise he or she will conduct a lien search, prepare a bill of sale, handle any bulk transfer tax matters, prepare the notes and or security agreements, non-compete agreements for everyone to examine and sign. The final preparations will be made for the lease assignments, utility transfers, financing, merchant account services, inventory valuation, and any other outstanding items necessary to complete the closing. A cashier’s check will be required at the closing for the amount due.

I). After the Closing: In most cases, we incorporate into the purchase offer a provision whereby the seller agrees to stay on for a period of time known as the “training period”. This normally includes meetings with employees, clients, technical education, computer updating and any other essential knowledge necessary to operate the business. The seller will assist you during this period of hand holding until you have a grasp for the business. Take notes. Above all, call us first if you have any questions.