Thinking about buying a business? Ready to start your next business venture? Research shows that 3 in 5 Americans want to own a business. So where do you start and where do you find a business? Partnering with a business broker can save you a tremendous amount time and money. Buying and finding a business can be a full-time job and entire books are written on the subject. Here are some basic tips on the process to help you get started.
Search
When you have decided you are ready to start looking for a new business opportunity, begin your search by looking for a business that aligns with your experience, interests, and passions. Also ask yourself will this business support your current lifestyle and consider the location of the business as to where you reside or want to reside. While it is important to consider the financial fluency of the business you are trying to purchase, it should also line up with your personal goals and values. Do not go on this journey alone. When you embark on an acquisition it is smart to seek the advice of a business broker, an accountant, and an attorney that are experienced in business transactions. These advisors will provide guidance and support all through acquisition process.
Start here by checking out our listings.
Inquire
When researching a business for acquisition it is important to ask plenty of questions and review a lot of information. Why is the owner selling? What are the assets of the business? What is the cash flow and overhead turn of the business? What is the remaining useful life of the equipment? What is the reputation of the business? What are the market trends? What are the supply chain and inventory requirements? How many employees are in the company? These and many other questions are usually provided in a Confidential Information Memorandum (CIM) that is prepared on the business by a business broker. Once you have reviewed the CIM and have determined strong interest in the business you will want to meet with the owner and see the location. Your business broker will arrange all this for you.
Confidentiality
Working with business brokers means your valuable information is protected. We collaborate with both buyers and sellers to ensure sensitive data remains private and confidential. You can trust that you will be in good hands with Transworld Cleveland West! Contact us to get started on buying your dream business.
Analyze
At this point in the process, you should have all your research on the business, questions answered, financial information on the business, and are ready to analyze all your options. Here is where a business broker can help you evaluate the different business ventures, provide an opinion of value, and help you to narrow down your choices. Which business aligns with your professional and financial goals? Which business has the most benefit for the future? Although they cannot pick for you, a professional can give their expert opinion to help you decide.
LOI
When you have decided on a business to acquire the first step is to present a Letter of Intent to the seller. This is usually a non-binding agreement that discloses a purchase price, a proposed structure, how the purchased will be funded, additional due diligence requests, and a timeline for the due diligence, the financing commitment, and closing. Many times, the LOI has an exclusivity period in which the business is taken off the market during the due diligence period, to allow the buyer to conduct their due diligence. A business broker will help you prepared the LOI and handle negotiations on your behalf with the seller or the seller’s representative.
Due Diligence
Upon execution of the LOI by both parties, the due diligence can continue. During this period contingencies are being removed, financials are being verified, the financing process is started, and the final legal and biding Purchase Agreement is in development. Your business broker will be able to provide you with a checklist of items needed to be cleared to keep the transaction moving according to the timeline.
Final Agreements & Close
After completing the due diligence checklist, the final purchase agreement will be presented to you and your legal team. The final agreement is a comprehensive and clear intention of the financial, legal, and tax ramifications of the deal. For the buyer’s benefit it is a best practice for your attorney to include a clause that protects you in the event the seller intentionally misrepresented the company or withheld crucial information.
At the closing, the parties exchange the purchase agreement, promissory notes, and/or other addendums to the agreement to include a bill of sale, non-competes, tax allocation forms, commercial lease documents, and any employment/consulting agreements if applicable.
Conclusion
If you are ready to take the next step and purchase a business contact Transworld Business Advisors of Cleveland West. We are acquisition experts and are committed to your success. Our team will support and guide you on the acquisition process with sound professional advice. Contact us to get our All-in-One Guide for Buying a Business.
