The Buying Process

Business Owner Decides to Sell a Business: The first step sounds very simplistic and elementary, but unless a business owner truly decides to sell, the process cannot begin. Many deals have been lost because the owner was not really a seller.

Determine Your Buying Parameters: Before a search for a viable business can begin, buyers should have a good idea of their needs and buying requirement. For example, is relocating a possibility? Another parameter should be the financial ramifications of a deal. Other factors to define in your search include the type of industry, annual sales volume, etc. By outlining the parameters of your search, you will increase the chance of finding an offering that fits your criteria.

Identify Potential Businesses: There is always an overabundance of buyers for good business offerings. The key is to determine the right fit for you as the new owner and matching your skill sets to those required to continue operations. Being organized and ready to act should be watchwords in successfully contending in an unbalanced market.

Determine the Value of a Business: The ultimate value of a business will be the final price that will be negotiated between you and the seller. Before placing a business on the market, a value or range of value must be established so that both parties will have a basis for what and how to negotiate. Ultimately, you will determine what to offer and hopefully your figures will be close.

Arrange Meetings With Buyer and Seller: Meeting with a seller for the first time is similar to a first date. You want them to like you and vice versa. The meetings with a seller are of paramount importance to both parties.

Offer to Purchase / Letter of Intent: After meeting with the owner and completing the analysis on the financial statements, buyers will either pass on a business, ask for more information or prepare a formal contract. The two most common legal vehicles are a Letter of Intent or an Offer to Purchase. The main difference between the two documents is the level of commitment. An offer to purchase is more binding.

Negotiations - Structuring the Deal: Once you have submitted a legal contract to acquire a business, the seller has three primary decisions: accept, decline or negotiate. Variables such as payment terms, length of training, consulting agreements and allocation of purchase price are just a few items that can be leveraged to make a deal more favorable.

Due Dilligence: Due diligence is a time to learn more about the other person, his business and determine if you are compatible. The normal range of due diligence can last between 7 to 45 days, with the average length being around 21 days.

Closing: This is the best part of the whole process, the time you are handed the keys to the business.