The Process of Buying Your Own Business

You’re ready to move forward

You’ve found a business your interested in and now you’re ready to move forward. You must obtain preliminary information on price, terms, income, cash flow, and general location. There is no point in continuing the buying process if the amount of cash necessary to buy the business is more than you are willing to invest. At this point, don’t worry about the full price. It’s important, but the key factor is the amount of cash that is necessary to buy the business. There is very little outside financing available such as banks, etc., for those who are purchasing businesses. The great majority of business purchases are financed by the seller. This is why the amount you are willing to invest is a key issue.

The Process.

• Complete a an NDA or “Non-Disclosure Agreement”
• Business Summary
• Visit the Business
• Get Your Questions Answered
• Obtain any Additional Information you may require
• Make an Offer
• Due Diligence
• Start Escrow
• Close the Deal

Complete a an NDA or “Non-Disclosure Agreement”

First and foremost, an NDA must be signed by both the buyer and seller. This maints confidentiality for all of the information provided to you on the businesses we review , discuss, or present. The confidentiality agreement protects the seller and is required. Your information is kept confidential.

Business Summary

After the necessary confidential agreements have been signed, we’ll take some time to review the business with you. This review will generally include: the Business Summary, history, hours, licensing, product overview, sales process, marketing summary, customer concentration , staffing, competition, suppliers, location, lease, equipment, inventory , accounts receivable and payable, expansion potential, training, and non-compete.

Visit the Business

Next we’ll visit the business to see if you like the location and the looks of the business itself – both inside and outside. This is a visual inspection. Pretend you are a customer. At this point we are not ready to talk to the owner. If the business is the type that does not lend itself to a visit, we’ll schedule an appointment with the seller to inspect the business, or have the seller’s representative schedule a visit. There is no point in going any further if you don’t like the physical location of the business or the appearance of it.

Get Questions Answered

If you like the business up until this point, you may want to ask additional question. They may include: What is the rent? How long is the lease? What have been the sales for the past few years? Can the seller support the figures you have been told? This is not the time for scrutinization. There will be plenty of time to do that and review other important issues during the due diligence phase. This is the time to get those questions answered that have a bearing on whether you may want to own and operate this particular business. It is also the time get your questions answered about the business itself.

Make an Offer

If you now have your basic questions answered and you want to proceed with purchasing the business, now is the time to make an offer, subject, of course, to verification of all the information you have received. The main purpose in making an offer is to see if the seller will accept your terms, price, and structure of the sale itself. Remember, you will have the offer subject to your verification of the important information. It doesn’t make sense to employ outside advisors and go through the time and expense of due diligence unless you can come to financial terms with the seller.

Due Diligence

At this point, you are ready to perform what is commonly called due diligence.

Escrow 

If due diligence is up to your satisfaction, a deposit is made to open escrow. Like buying a home, escrow prepares all closing documents and will conduct necessary legal searches. Closing costs are normally shared by buyer and seller equally.

Closing the Deal

Congratulations! Like so many that have successfully used Business Broker California, you are now a proud business owner. At this point you should announce the new ownership to the employees and begin the transition period with the previous owner.