Steps to Buying a Business2017-08-17T21:08:18+00:00

Steps to Buying a Business

  1. Initial Communication with Broker
    1. Buyer contacts Broker
      1. Areas of interest are identified
      2. Meeting time is scheduled or Registration Package is forwarded to Buyer
  2. Buyer Interview
    1. Broker interviews prospective Buyer
      1. Confidentiality Agreement signed to protect confidentiality of target business(es)
      2. Brokerage Disclosure signed acknowledging that Broker represents Seller
      3. Buyer Profile containing Buyer’s criteria and financial information or Financial Statement is completed by Buyer
      4. Buyer’s abilities and interests are identified
      5. Broker educates Buyer regarding acquisition process
      6. Buyer is provided preliminary information on businesses or franchise opportunities that match criteria
  3. Buyer Focuses on a Business
    1. Buyer is provided detailed business information, including financials, equipment lists, inventory information, leases, contract rights and franchise rights
    2. Buyer researches industry and specific business confidentially
    3. Financing strategy formulated
      1. Cash purchase
      2. Obtain equity from personal assets
      3. Small Business Administration or other business loan
      4. Seller financing
  4. Seller and Buyer Meeting
    1. Meet at the business at a time acceptable to Seller
    2. Tour of the business
    3. Exchange of personal and business information
  5. Additional Information Provided to Buyer
    1. Information relevant to pricing and decision making process
    2. Verification of information occurs later during the due diligence process
  6. Letter of Intent (LOI)
    1. Buyer submits Letter of Intent
      1. Outline of negotiable and relevant points of offer
      2. Define contingencies that must be satisfied
      3. Timing of transaction defined
      4. Refundable Earnest Money is included as a goodwill gesture
    2. Broker presents the LOI to the Seller
    3. Seller accepts, rejects or counters the LOI
      1. If offer is countered, resolution is negotiated through Broker
      2. Earnest Money is deposited in Broker’s trust account following written acceptance of LOI by Buyer and Seller
  7. Asset Purchase Agreement first draft is prepared by Broker and presented to Buyer for attorney and accountant review
    1. Buyer/Advisors present changes to Broker
    2. Broker reviews amended Agreement with Seller/Advisors
    3. Seller/Advisors present response to Broker
    4. Mutually acceptable Agreement is signed by the parties with Exhibits attached
  8. Steps To Closing
    1. Seller, Buyer and Broker determine timeline and prioritization of events necessary for Closing
    2. The Due Diligence Process
      1. Buyer/Advisors present a list of due diligence requirements
        1. Financials
        2. Premises inspections
          1. Health Department
          2. Fire Department
          3. Environmental Analysis
          4. Other
        3. Company contracts or agreements, including leases for real and/or personal property
          1. Tangible Asset review
          2. Furniture, Fixtures and Equipment
          3. Inventory
          4. Leasehold Improvements
          5. Patents or intellectual property
          6. Social media accounts
          7. Licensing
          8. Employees or Company operations
          9. Other
      2. Buyer creditworthiness, if applicable
        1. Buyer provides Seller with Financial Statement
        2. Broker obtains Buyer’s credit report for Seller
        3. Seller determines creditworthiness of Buyer
      3. Due Diligence findings are reported to Broker within defined timeline
        1. Concerns are resolved between the Parties
    3. Transfer of Leases, Contracts, Licenses and Franchise Rights
      1. The Parties work together to transfer any contract rights or obligations
      2. Continuing Seller obligations after Closing determined/negotiated on an individual basis
    4. Financing
      1. Broker assists Buyer in obtaining financing
  9. The Closing
    1. Broker works with the Parties/Advisors and Closing Escrow Attorney to prepare Closing Documents, release liens and formalize the business sale
    2. Costs to Buyer
      1. Personal Advisor fees
      2. Sales tax on personal property as per Asset Purchase Agreement
      3. Escrow Attorney Fee $500 – $1,000
      4. Prorations at Closing
      5. Deposits as required
      6. Other, as applicable
    3. Final Inventory is taken
    4. Parties Sign Closing Documents At Closing.