3 Steps to Buying a Business – A Guide For Business Buyers



Ready to buy your own business? Here are three steps you will need to take on your road to business ownership.

 

Step 1 step 2

 

Step 1: Arranging Financing

One of the most important steps in the process of purchasing a business is financing. How are you going to pay for your new venture?

There are several resources available which you could tap in order to put together the financing needed for your journey into entrepreneurship. These options consist of gathering funds from family members/friends, financial institutions or seller financing.

No matter what the source of funds, all lenders are going to have conditions which you will have to satisfy if you want to be approved for the funds. They are going to require you to have adequate cash readily available for the down payment in addition to having sufficient working capital to sustain the business.

You will need to be aware of and account for costs like closing fees. It is possible to either pay for the closing fees up front or plan to have them incorporated within the amount that you will be financing.

Having financing or at least a down payment in place before you begin your business search will simplify the process of finding the right business for you.

 

Step 2: Making an Offer

You found a business and have finished going over the initial financial records. You think this might be the business for you. It is time to make an offer, but how do you determine what that offer should be?

First, consult with your business broker. There are considerations that influence price such as the amount comparable businesses have actually sold for, the value of inventory and contracts – the list goes on. By consulting with your business broker you can consider all aspects and decide whether the asking price is fair and how much you are willing to offer.

 

Step 3: Due Diligence

After an offer is accepted, the offer you submitted essentially becomes the purchase contract – and you will move to the next stage – due diligence. This is a crucial step when purchasing a business.  It is due diligence which enables you to figure out whether or not this business is for you. It also helps to determine what price you will be prepared to pay for it.

The evaluation of the business will begin with examining the previous three years of financial records. You need to reveal any unresolved legal actions, relationships with vendors and clients, intellectual property rights including copyrights or patents, as well as any future liabilities.

Once you have all the necessary information you can make an informed decision about whether or not to proceed. This is the nature and necessity of due diligence.

The evaluation will need to be modified to take into account any details uncovered while in the due diligence phase. Developing a complete picture of the value of the business will allow you to determine whether or not to move forward as well as the highest price that you are prepared to spend.

As soon as you have arrived at what you feel is a complete picture of the business and have also arrived at a price that takes into account what you found during due diligence – you and the seller will negotiate to amend the purchase contract and proceed to the closing table. The purchase contract might be quite a few pages long due to the fact it itemizes each and every component of the sale. This step commonly requires using the services of your business broker, a CPA along with an attorney to guide you in the process.

 

Do you have more questions about the steps required to buy a business? Would you like to know more abou the due diligence process? Ask us here!

 

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


Doing Due Diligence On Yourself – How Smart Sellers Stay Ahead



Group of Business People Working on an Office Desk

 

You might think you are ready to sell your business, but few small business owners actually are. Do you have all of your books in order, have you made any necessary repairs or paid off all of your business debts?

 

Preparing a business for sale is a lot like preparing a house for sale. You need to make it look aesthetically pleasing and fix what’s broken.

 

There is, however, one major difference. Due diligence.

 

Once you have accepted an offer from a buyer, the due diligence period begins and you will be opening up your financial records, contracts, leases – everything – for that buyer to inspect.

 

Any problems found during due diligence can lead to one of two outcomes. Either the deal is dead and the buyer walks away, or they come back to you with a lower offer to compensate for the problems they’ve found.

 

No seller wants a perfectly good deal to fall through, and you want to get the best possible price for the business you’ve worked so hard to build – so how do you avoid due diligence issues?

 

Do due diligence on yourself.

 

Before a buyer has a chance to peek behind the scenes and go over your books with a fine-tooth comb, you should do this yourself. By performing due diligence on yourself you will see your business through a buyer’s eyes and will be able to address any potential problems long before a buyer finds them.

 

Don’t think you have any issues that will come up in due diligence? Think again. All small businesses have a few skeletons in the closet, and they can’t be hidden. Buyers always find issues, so the best way to deal with this eventuality is to solve the problems before they are found.   

 

How do you do due diligence on yourself? Ask your business broker for guidance and perhaps employ the services of a business transaction CPA. Some questions you could address?

 

What documentation do you need to be going through?

Do you know where all of your documentation is?

What financial information will buyers be interested in?

What are your possible due diligence issues and how can they be addressed before a buyer finds them?

 

Performing the due diligence process on yourself will help you and your business to stay ahead of the game during the transaction process and will also help you get the biggest return on your business sale.

 

Do you have questions about what buyers will want to see during due diligence? Would you like to know what problems we’ve seen in due diligence in the past? Ask us! Leave any questions or comments and we would be happy to help.

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


Business Buyer Questions – Keep The Deal Alive



Business transactions are complicated beasts, and as such they fall apart more readily than they stay together. If you are looking at buying a business, you will need to do your part to keep your deal together if you ever hope to make the jump to business ownership. Here’s how.

 

Confused businessman looking at question mark

 

Are you really, really sure that you want to buy a business? Small businesses are very rewarding ventures, but they are intense in terms of time and effort that you will need to invest. Are you sure you want to make the move from a 9 to 5 job with two weeks of paid vacation to a life where the buck stops with you? Yes, small business owners decide what hours they work – but the hours necessary can be very long. Is your family ready to sacrifice this time with you? Consider the changes that will happen before they do.

 

Do you have realistic expectations? Buying a business is absolutely nothing like buying a house, and understanding how businesses are priced is not like pricing a car. Buying a business also takes a lot of time and patience. It also requires many, many moving parts and a good deal of negotiation. Talk early and often to your business broker about managing your expectations during the purchase of a business so you will know what to expect.

 

Have you done your homework? Do you have the background and experience to own the type of business you are considering? It is far easier to go into business ownership in an industry where you have some practical experience because you will already know something about how the business is run and the typical operating procedures that you will need to have in place. If you are trying to enter a completely new industry, then you will need to do some serious research into how that type of business runs on a day-to-day basis. You don’t want to give yourself an incredibly steep learning curve the moment you take over as owner.

 

The complexity of business transactions also means it is important to remember some other key points. First, honesty is the best policy. Second, trust the judgment of your business broker. Third, keep your expectations in the realm of reality. Lastly, be patient with the process. If you as a buyer are serious about getting the deal done, any potential problems can ultimately be resolved.

 

Do you have questions about the business buying process? Would you like to know what industries would be right for you? Ask us! Leave comments or questions here and we would be happy to help.

 

 

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com



Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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