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. You can read more about the initial steps you’ll take here – but the last steps you take before the day you get handed the keys can be some of the most important.
Here’s a few to consider:
Complete a thorough and final round of due diligence on the information provided by the seller. Review all relevant documents, contracts, financial records and legal obligations to ensure there are no surprises or undisclosed issues. This step is crucial to confirm the accuracy of the information and ensure that the business is in the expected condition.
Work closely with your business broker and business transaction attorney to negotiate and finalize the purchase agreement/contract. This document outlines the terms and conditions of the sale, including the purchase price, payment terms, assets included and any contingencies. Ensure that the agreement reflects the agreed-upon terms and protects your interests as the buyer.
Identify and obtain any necessary approvals, permits or licenses required to operate the business legally. This may include licenses for specific industries or local permits. Talk to your business broker about what you’ll need from state and/or local regulatory agencies to ensure compliance with all legal requirements. You can read more about that here.
Develop a comprehensive transition plan with the seller to ensure a smooth handover of the business operations. Identify key employees involved in the transition process and communicate the plan effectively. Prepare any necessary training materials, transfer important documents and information, and ensure a seamless transfer of responsibilities. Use the entirety of the training period outlined in your purchase contract to your advantage and learn everything you possibly can from your seller.
Schedule a final walkthrough of the business premises with your broker to assess its condition and ensure that all assets included in the sale are in the expected state. Check that all equipment, inventory and fixtures are accounted for and in working order. Address any outstanding issues or discrepancies before the closing.
The last steps before reaching the closing table are crucial in finalizing the purchase of a small business. Completing due diligence, finalizing the purchase agreement, obtaining approvals and licenses, preparing for the transition and conducting a final walkthrough are all essential tasks. By carefully completing these steps, buyers can mitigate risks, address any outstanding issues and set the stage for a successful transition into their new business.
Are you new to the business buying process and have questions about these pre-closing tasks? Would you like to know more about what the transaction process looks like for the type of business you are interested in buying? Ask us! Feel free to leave questions or comments here and we would be happy to help!