Before you begin to look for a business take some time to do a serious inventory of your skills, aptitudes and qualifications. Determine how much you have available to invest. Whether or not you will be seeking financing (either SBA or seller) and what your timeline is. Identifying your preferred industries, price range etc. will help you narrow your search.
Find a business. Armed with your instructions your business broker will be able to present you with a list of businesses that match your criteria. It is best to focus on no more than 2 or 3 businesses at a time as any more than that will become confusing. Once you have identified a suitable business you can move on to the next step.
Sign the NDA (Non Disclosure Agreement). This document is always required. You may also be asked to provide proof of funds or funding ability and a resume or bio detailing your skills. Once you have provided the required information you will receive a “Confidential Memorandum”. This is a detailed summary of the specifics of the business including typically a three year financial history. If having reviewed this your remain interested then:
Your next move is typically a meeting with the owner. However you might choose to get some questions out of the way first by email. The meeting can take place in person although increasingly many people are meeting virtually with such tools as Zoom.
The offer. If you are now ready to make an offer and your business broker can assist you in putting this together. Be careful to submit a reasonable offer. “Low ball” offers are rarely a good idea. The seller may respond to your offer with acceptance, rejection or further negotiation. But once agreement is reached its time to move on to the next step.
Due Diligence. This is where you get to verify the information provided to you in the CM. A thorough due diligence is in the best interests of both buyer and seller. If dissatisfied at the results the buyer usually will have the right to back out and have their deposit returned. With a successful due diligence its time to move on to:
There are some other tasks that may need to be completed during this step
- Buyer establishing a Corporation or LLC
- If the business is a franchise, franchise approval will be required
- If the property is leased, then Landlord approval is typically needed
- If the property is being sold with the business some other steps may be necessary (Environmental study, property appraisal, title search)
- If lender financing is needed then a loan application through a SBA Lender must be processed
- If the business has specific licensing requirements the buyer may need to apply for the licensing
With everything now out of the way we can schedule the closing. Your Broker will recommend a neutral closing attorney. Paperwork will be drawn up and circulated for review days in advance. You may choose to have your own attorney look this over. You will also need to arrange for payment of funds needed to close. This is typically done by wiring the funds a day in advance. But be careful to confirm the wiring instructions because wire fraud is a serious problem
Sign on the dotted line. Typically done around a table. But some closings are done remotely. Discuss your intention with the closing attorney. All your hard work has come to fruition. Congratulations you are now a small business owner.
In this final step the seller will typically introduce the buyer to the employees and begin the process of transition which often involves a period of training for the new owner.
Anthony John Rigney is the owner of Quorum Business Advisors, LLC a leading Florida based Business Brokerage. For more information on Quorum’s services contact us today or schedule a convenient time to talk.