Buying A Business: It's A Brand
New Ball Game
Unless you've bought or sold a business in the past, you'll
find that buying a business can be a confusing and even
trying experience. That's why it is important for the prospective
buyer to be knowledgeable about the process involved in
buying a business. Thoroughly understanding the process
will assist even a veteran of business transfers in working
with our company.
Getting Started: Questions
And More Questions
Finding a business opportunity usually starts with researching
local newspapers, placing telephone calls or visiting web
sites like the one we host. The prospective Buyer may be
a Corporation, Private Investment Group or a sophisticated
Private Investor who has a very definite idea of the type
of business wanted. On the other hand, many first time buyers
are still in the formative or exploratory stage of their
search. Frequently that Buyer's first question is, "What
kinds of businesses do you have?".
Although we have many business listings, that question
can only be answered properly when we have some idea of
the prospective Buyer's resources, skills and needs. For
example, if we just listed Ford Motor Company and the prospective
Buyer has several billion dollars in available funds and
a background in automobile manufacturing, that would be
a match made in heaven. But that perfect match would never
have occurred unless we ascertained pertinent information
regarding the prospective Buyers background, resources and
objectives in advance.
The first and most important step is for the business
Broker to learn about the prospective Buyer. When we ask,
"How many days per week are you comfortable working?",
“Are you planning to work alone or hire employees?"
or "How much cash do you have for a down payment?",
along with other questions, we are gathering the information
necessary to match the prospective Buyer to an appropriate
business opportunity. We are also narrowing the search and
saving the prospective Buyer time and aggravation.
Defining The Business Opportunity
Search
After the search has been refined to businesses which
fit the prospective Buyer's criteria and requirements, we
can communicate non confidential summaries of our business
listings to the prospective Buyer in a number of ways. One
way is for the prospective Buyer to view our web site and
access the non-confidential summaries of our business listings
by simply clicking on the "Businesses
For Sale" page. This page will provide our business
opportunities lists, a description of each business, financial
details and the asking prices.
Focusing On The Right Business
Opportunities
During the search, the prospective Buyer will receive
multiple lists of interesting business opportunities. At
this stage the business opportunity search moves to a new
level involving the necessary disclosure of confidential
information relevant to the purchase or sale of any business.
The new level is one of mutual trust and obligation between
the prospective Buyer, our company and the Seller(s) of
the business(es) of interest.
Confidentiality when buying a business protects the prospective
Buyer from having anyone such as an employer, employees,
or the competition discover about the proposed acquisition
prematurely. It also protects the Seller against unnecessary
problems with customers, employees, vendors, competitors,
landlords, bankers, creditors, etc.
As a result, all prospective Buyers are required to sign
a Non-Disclosure and Confidentiality Agreement before receiving
sensitive confidential information. This document may be
viewed and retrieved by clicking the “Confidentiality/Non
Disclosure Form” and then printing the documents.
The Business Profile: The Facts
An important element in the purchase process is the business
profile. This report on the business offered for sale is
written to provide information that the prospective Buyer
can review and evaluate in determining the suitability and
desirability of the business opportunity. A typical Business
Profile contains a detailed description of the business,
a summary of financial data and additional business facts
such as lease information, number of employees, inventories,
pending and operative contracts with vendors and customers
and other pertinent information. Following a thorough review
of the Business Profile and consultations with the business
broker, the prospective Buyer will have a solid understanding
of the business, its operations and potential for continued
future success.
Face to Face Meeting
After reviewing the Business Profile, financial data of
the business and the business premises, if the prospective
Buyer determines that the business presents a desirable
opportunity the prospective Buyer should be prepared to
make a purchase offer. In some instances, it may be possible
to arrange a face to face meeting between the prospective
Buyer and the Seller which may provide additional insights
into the operation of the business not otherwise obvious
from a review of written documentation.
Making An Offer
After meeting the business owner and touring the business,
the next step is to present an offer of purchase for the
business. Making the offer is not, however, the final step.
In fact, it should be viewed as the first of several steps,
each of which bring the Buyer and Seller closer to completing
the transaction.
Since most sales involve privately held businesses, the
Buyer is obligated to make an offer before actually reviewing
the business' internal financial records. The Buyer should
understand that its offer is always contingent upon the
Seller demonstrating the accuracy of its representations
to the prospective Buyer’s satisfaction.
It is the prospective Buyer's duty and obligation to verify
the accuracy of the Seller’s representations by retaining
attorneys, accountants, business appraisers or other professionals.
Any agreement between the prospective Buyer and Seller is
“non-binding” until the prospective Buyer has
exercised due diligence in verifying the accuracy of Seller’s
books and records and all contingencies have been removed.
An Offer To Purchase will consist
of the following:
Due Diligence
The prospective Buyer and its advisors, attorneys, accountants,
business appraisers and other professionals will have a
specified period of time to complete a thorough review of
the Seller’s books and records, inspect the business
premises and take other appropriate steps to verify the
Seller’s representations and remove all contingencies
(typically 5-10 days). The prospective Buyer and his advisors
must utilize due diligence in completing their review of
Seller’s business in a timely manner. When the due
diligence process is completed and all contingencies are
removed, the contract becomes binding. Should the business
fail to pass due diligence review, the prospective Buyer
may withdraw, modify or amend the Purchase Offer. The Due
diligence procedure is costly and time-consuming. It is
only initiated after the respective Buyer and Seller have
reached an agreement on price and terms.
Financing
The majority of business purchase transactions require
some form of financing. We work with our Buyers to secure
the appropriate financing. This may involve Seller's financing,
bank loan, Venture Capital financing, Angels financing(private
investor), SBA financing and funds obtained through other
financing resources. Regardless your financing requirements,
we will provide guidance and assistance in locating right
lender.
Escrow & Closing
Your business purchase will be handled by an independent
escrow company. Typically an escrow is opened with the deposit
of the Buyer’s earnest money down payment, generally
within three(3) to five(5) days after all contingencies
have been removed or satisfied. The average escrow will
close in one(1) to four(4) weeks if there are no recorded
liens against the business. A Cashier’s check will
be required for the amount due at closing of escrow.
Congratulations! You’re
In Business
The escrow has closed and the big day has arrived. The
former prospective Buyer is now owner of the business. A
new adventure is at hand. You are now in control of your
own destiny.
When you work with us, we will guide you along the way
and help make your transition to business owner stress free
and simple. So, now is the time to go back to our “Businesses
For Sale" section and get started on your search
for your part of the American dream.
Contact us with any questions
you may have about buying or selling a business.
