Advice For Buyers

How to buy a business
No two business acquisitions are alike. However, you will be more successful and will save a great deal of time and money if you plan the process before you start your search for a business.

Start by deciding to buy
The first step should be a decision to buy a business. Sit down and judge for yourself what it would mean to own your own business. Honestly assess the pros and cons of owning a business before you start looking rather than six months down the line. Most people say they would like to own their own business but few are actually aware of all the benefits of ownership or all the sacrifices involved. Talk with your spouse about this decision as well as any advisors you have. Get advice from any business owners you know and think hard about this decision. It will affect the rest of your life. If you then decide you want to own your own business, make a commitment to yourself that you actually will become a business owner and set a time frame for your search.

Decide what to buy
The next decision you must make is what to buy. Do not start looking in the paper for business opportunities that are available at this point, or you will be caught up in the process of searching before you have determined what is right for you. It is much more efficient to honestly assess your interests and abilities before starting your search than to investigate a business for some time and then determine that that type of business is not right for you.

Once you have decided what type of business to buy, you need to assess what can you afford to buy. Assessing your financial abilities involves examining what you can afford to buy in terms of price and also what income you need to generate from the business to support your lifestyle. A broker can be instrumental at this stage, not only in helping you determine the right type of business for you, but also in determining what you can afford.

Develop a search plan
Once you have decided what to buy you need to develop a plan for how you will search for the kind of opportunity you are seeking. Often businesses for sale comprise a hidden market where the best opportunities may not be available to the general public. Your search may include brokers and intermediaries, newspaper listings, referrals, attorneys, accountants, industry magazines or newletters, the chamber of commerce, the internet, and many others. You can also hire a broker to do the search for you and to bring you suitable opportunities that meet your criteria.

Find the business and negotiate a price and terms
Once you have found the business you want to buy, you must make an offer and negotiate a deal that will satisfy both you and the seller. Keep in mind that deals structured so there is a win-win situation are much more likely to close than those with win-lose situations, and that our brokers can suggest ways to do this.

Once you have an offer and acceptance it is time to bring in some other professionals. The seller's attorney will be drawing up a Purchase and Sale agreement along the terms defined in your purchase offer. At this point you need to hire a transactional attorney and a transactional accountant. The job of the transactional attorney will be to review the purchase and sale agreement, to perform any legal due diligence necessary, and to handle the closing. The transactional accountant will handle any accounting due diligence and provide advise on tax minimization. Also at this time, financing applications should be made to appropriate lending sources.

Once all contingencies have been met, a closing is scheduled. At this time all remaining documents are signed and funds exchanged. There is usually a transition period at this point where the seller trains the buyer in the business. From this point on, the Buyer has realized the American dream: Owning your own business.