Buying a business really is a complicated process, especially if you never bought a business before. You need to start with finding the right opportunity among hundreds or thousands of businesses for sale, then evaluate which business opportunity represents the best fit for you, and how well it fits your life goals.
After finding the potential business you need to ask the seller or agent the right questions to validate your choice which is something Michael will assist you with. If you like the business and feel that it might be the one, move forward with presenting the offer. There are many different types of ways to structure an offer. How much an offer should you present? What contingencies and conditions do you include in order to protect your interests?
After a successfully negotiated contract you will then have a due diligence period. This is probably the most important step in the business buying process. You will be validating information provided to you by the seller and confirming your decision to buy. There’s no standard routine for due diligence; it all depends on the specific situation of any particular business. It may include inspection of financial and operating documentation, tax returns, insurance policies and lease agreements. It may also involve going through, literally, boxes of sales receipts, invoices and purchase orders. Most companies do not have perfect records, and it may take substantial amount of time to sift through the records but it is very important to your success.
Depending on your circumstances you can get as many or as little services as you need. For example, Michael can locate a suitable business opportunity for you, assist with inspecting financial and business documentation during due diligence or assist in negotiating favorable terms of purchase, etc., or any combination of the above. You can also request Michael to take you through the entire business buying process. As follows is an in-depth description of the various areas Michael can assist you in.
Defining Business-Buying Criteria
First-time business buyers have a hard time defining business-buying criteria. If all you’ve got is: “I want a profitable business”, it will be very difficult to find one. There are more than likely hundreds of businesses in your price range in the local area of all shapes and sizes, and it will take an enormous amount of time to evaluate each one of them. Your life will be much easier if Michael can narrow down the selection. Besides, the selection of a business it should be in-line with your life goals. Michael can help you formulating both the life goals and business-buying criteria.
Private Business Search
If for example you’re going after a small business with $100,000 net income, a private business search is probably not for you. However, if you’re looking for a business generating $500,000 in EBITDA, you might want to consider such an option. Although there are some very worthy businesses on the market, sometimes the best ones aren’t even listed. Even if the sale is considered, the proper steps haven’t been made meaning they may take some time to procure but it may be a more viable option for you. Michael has means of identifying such hidden treasures. As a professional business intermediary Michael will approach the target companies with a specific business-buying proposition. In the event they might be interested, Michael can move to the next step – evaluating the target business.
Evaluating Business Opportunities
Unless approached correctly, most privately listed businesses don’t have any intention to show you any documentation, unless they know and have agreed to the terms of acquisition. On the other hand, you as a buyer can’t formulate the proposal until the target company’s performance is known. It’s a classic “catch twenty two” situation. Michael knows how to properly handle these situations. It allows us to move forward and evaluate the business.
Preparing A Letter Of Intent And Offer
In the case the initial evaluation reveals an attractive acquisition opportunity; it’s time to move to the next step – presenting a Letter Of Intent (LOI) or offer. The difference between the two is that the LOI is usually a non-binding document, whereas an offer normally is a part of a binding purchase agreement, yet it’s contingent upon a number of conditions to protect the interests of both sides. The LOI is customarily used for acquiring larger businesses with too many unknowns. Terms of a LOI or offer are based on the information provided by the seller, and is subject to verification by the buyer or his counsel during due diligence. Unless you’re a seasoned serial entrepreneur, Michael recommends you to use services of both a business broker and a business attorney for drafting the LOI. Michael is fully qualified for preparing an offer for purchasing a small business.
There are hundreds of books written on the subject of business negotiations. However, unless you have spent hundreds of hours in actually negotiating and closing actual deals, you can’t be fully prepared to handle it properly. First, when two people negotiate a business acquisition, there’s a lot of variables and tension. A good negotiation should be conducted in a calm manner with all emotions kept out. The second problem arises from negotiating parties not being comfortable to convey all their concerns directly to each other. Example: “I am afraid that the seller will take me with inventory…”, or “… I think, he can take a large portion of his business with him.” You can express all your concerns to a neutral third party who represents you and knows how to deliver a message without igniting the sparks.
Due Diligence Inspection Assistance
Due diligence is the most challenging part of the business acquisition process. You have to determine the feasibility of acquiring a business and confirm that the information provided to you by the seller is indeed correct. It requires a clear understanding of the target businesses operation, the documentation that it produces, lease agreements, insurance policies, inventory control procedures, staffing, etc… – the list is endless. If you don’t have such expertise, please find an adviser who can guide you through the process. Infinity Business Brokers have inspected hundreds of businesses of all types and can provide you invaluable assistance with the due diligence process. With your intermediary standing by your side, you’ll be completely confident in your decision.
Finding a Qualified Escrow Agent
When the due diligence process has successfully concluded the next step would be to find a qualified escrow agent. The escrow agent will be a third party to protect the funds from any claims. Escrow fees may vary greatly from one company to another, to as much as 2-3 times. Michael will assist you to find a qualified escrow company.
Record-Keeping And Follow-Up Activities
Although it may sound like a very trivial task, record-keeping and follow-ups are critically important for a successful business acquisition. Most likely, you will be reviewing several target companies at once. It means several stacks of documents that need to be organized, several email threads to maintain, follow-up telephone calls with information requests, questions, answers… Inifinity Business Brokers will save, organize and maintain the above activities for you. Michael will take the load off of your shoulders and make sure that nothing is forgotten and missed. Good businesses are picked from the market very quickly. One-two days of delay may turn into lost opportunity. With our help you will never miss a worthy opportunity.