If you think you might be ready to take the entrepreneurial leap, but don’t have a genius start-up idea you can work on in your garage – you don’t need one! Existing businesses get bought and sold everyday, some 500,000+ a year (a number that is on the rise as baby boomer owners enter retirement and list their businesses for sale). These existing businesses can instantly turn you into an entrepreneur, no start-up required.
If you’ve always wanted to be your own boss and think buying an existing business might be for you – the process is fairly straightforward.
Here’s step three: It’s time to make some choices.
Don’t panic. You don’t have to sign your life away – and you don’t even have to make a final decision at this stage. Once you’ve seen the initial packages for the businesses you found in step two you’ll have some time to consider what they’ve sent you. Using the information you have you can decide if you’d like to proceed with exploring a business or two that you are still very interested in.
This is the point where conference calls between you and the business seller can be extremely helpful. Talking with the current owner can give you insights into the things that don’t necessarily end up on paper. A caveat here. You must prepare questions – good questions – ahead of time. Your business broker will (and should) help you with coming up with great questions to ask. You shouldn’t go into a conference call with a seller blind and ask basic questions that had already been answered by the package you were given. This colossal waste of time for everyone involved might turn a seller off and they could refuse to proceed any further with you. Remember that a business is someone’s baby, so they aren’t likely to hand over the keys to someone who they feel isn’t up to the job.
After your initial call with a seller you can ask for more information, but you aren’t likely to get much more than you already have unless there’s an offer on the table. Making an initial offer can seem daunting – but here’s an important point to remember. Absolutely no money changes hands until after you’ve been given ample time to research the business during a process called due diligence. Due diligence starts after an offer has been initially agreed upon by both parties, and a typical due diligence period is a couple of weeks – plenty of time to review things like contracts, tax returns, inventory lists and the like. Once due diligence is over you can buy the business for the price in your accepted offer, renegotiate the price based on things you found or walk away completely.
During the due diligence process the business is pulled from the market temporarily so you don’t have to worry about other buyers swooping in and buying the business from under you. There can be, however, better offers or backup offers on a business you are considering – so you’ll need to go into the process ready to make a move and decide in a timely fashion whether or not this business is for you.
Don’t forget that you can absolutely walk away at any time if you begin to feel like you wish you hadn’t made your initial offer – so don’t be afraid of this very important step.
Ready to take the third step towards business ownership? Do you have questions about what an initial offer looks like? Would you like to know more about the due diligence process? Ask us! Please leave us questions and comments, we would be happy to help.
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