The Buying Process
1. Before Calling A Broker
If you are considering purchasing a business in the near future, several basic questions should be considered before contacting a broker. First, the type of business that you would like should be defined. If you are ‘open’ to considering any profitable business, try to narrow it to a wholesale, retail, service or manufacturing business or at least be prepared to describe the type of business that you would not consider. Knowing what you don’t want might be the best place to start. Second, are you willing to relocate for the ‘right’ opportunity? How far are you willing to commute daily? Third, how much money are you ready, willing and able to apply to this investment challenge? Keep in mind that banks are willing to consider (with an SBA guarantee) loans up to 80% of the total purchase price including inventory and working capital. Also if you have a 401K or IRA retirement plan, it maybe possible to invest in your own business without an ‘early withdrawal penalty’ or immediate tax consequences.
2. Contacting a Professional Intermediary
Once you have determined what you would like to buy, approximately where you would prefer to have it located, and how much cash you would have for a down payment, the next step would be to contact a professional who specializes in the sale of businesses and commercial investment properties. If you are not sure how to answer any of the above questions, an experienced broker will assist you if requested. If you have seen a business of interest on our website and want more information, you will need to sign a confidential agreement after contacting the listing associate and determining if this will be a possible ‘fit’. Arrangement will then be made to present to you specific information about the business of interest.
3. Meeting the Seller
If your initial reaction to one or more of our offerings is positive, we will arrange for you to meet on-site with the Seller to view the business and directly ask any questions which may have arisen from your review of the data provided. You might have further exploratory contacts with the Seller, but at some point you will have to decide whether or not to proceed to an offer.
4. Making an Offer
When you find the business which best fits your needs, we help you make a written offer to purchase. This offer will be accompanied by a promissory note (made out to the escrow attorney) as an earnest money deposit. This will open negotiations.
The offer will state price and terms and will normally list several contingencies, such as your review and written approval of detailed financials, equipment lists, lease transfers, provisions for training, etc. If the business is a franchise, acceptance by the franchisor would be added. The time period of approving contingencies varies from 5 to 20 working days, depending on the complexity of the transaction. In the event you do not approve all contingencies in writing, your offer is automatically voided and your promissory note cancelled and returned to you unless you and the seller mutually agree to extend the approval period.
An important function of the initial offer is to provide an opportunity to negotiate on price and terms, gain agreement on these, and get to the vitally important phase called due diligence wherein you and your financial advisors are afforded full access to all business records for detailed review.
5. Counter-Offers And Acceptance
The Seller will accept, counter or (occasionally) reject your initial offer. Normally, there will be a counter-offer expressed through written and initialed changes to your offer. This counter you can either accept by initialing the Seller's changes or counter again with your own changes. Upon final agreement and acceptance, the business will be off the market for the contingency period.
6. Due Diligence &Contingency Removal
At this step, you (and your accountant, if desired) will review financial records, leases, equipment lists, and any other aspects of the business you deem necessary. If the Seller is providing financing, your personal financial statement should be made available to him.
Once all conditions of the sale have been met and contingencies removed and signed off, you will redeem your earnest money promissory note by personal check payable to the designated Escrow Attorney.
7. Authorization To Close
Your approval of contingencies will also constitute your authorization to proceed to closing. We will immediately deliver your check, copies of all documents, and other necessary information to the Escrow Attorney and schedule a closing date convenient to all parties. By definition, the Escrow Attorney has a duty to draft final closing agreements that are in accord with the original Earnest Money and related papers. Since he represents neither the buyer nor the seller, either party can request that copies of the final agreements be sent to his or her own attorney for review.
Closing will usually take place at the office of the Escrow Attorney with you, your spouse, the Seller and the Broker present. The Escrow Attorney will explain all documents and coordinate the transfer. In some instances, you may choose to have your attorney or other advisor attend.
None of this can happen, however, unless you contact us
. We are looking forward to working with you.
Reasons for buying a business | Starting your own business
Buying an established business | Buying a franchise
| Buyer Groups