|
|
|
Buying
Tutorial
|
 Contact
Information |
|
|
|
|
|
|
TheBuying
Process
|
|
| |
|
One of the most common questions asked by those
who have never purchased a business (which is
incidentally about 90 percent of those looking
to buy a business) is how do you actually buy
a business. There is no right or wrong way to
buy a business. However, it is important that
you get answers to all of your questions and
that you have all the information necessary
to make an informed decision. Here are the steps
to buying a business that over the years have
become the most efficient and practical:
|
| |
Get the Basic Facts
Get preliminary information on price, terms,
income, cash flow, and general location. There
is no point in continuing the buying process
if the amount of cash necessary to buy the
business is more than you are willing to invest.
At this point, don't worry about the full
price. It's important, but the key factor
is the amount of cash that is necessary to
buy the business. There is very little outside
financing available such as banks, etc., for
those who are purchasing businesses. The great
majority of business purchases are financed
by the seller. This is why the amount you
are willing to invest is a key issue.
Also, the business has to be able to meet
your basic financial needs. You always expect
a business to improve under your ownership,
but you have to be able to meet your living
expenses as well as meet the debt service
of the business.
|
Visit the Business
Visit the business to see if you like the
location and the looks of the business itself
- both inside and outside. This is a visual
inspection. Pretend you are a customer. It's
not time yet to talk to the owner. If the
business is the type that does not lend itself
to a visit, make an appointment with the seller
to inspect the business, or have the seller's
representative schedule a visit. There is
no point in going any further if you don't
like the physical location of the business
or the appearance of it.
|
Get
Questions Answered
If you like the business so far, it's
time to get your questions answered.
For example: What is the rent? How long
is the lease? What have been the sales
for the past few years? Can the seller
support the figures you have been told?
Now is not the time to have the seller's
books and records completely checked.
There will be plenty of time to do that
and review other important issues during
the due diligence phase. This is the
time to get those questions answered
that have a bearing on whether you may
want to own and operate this particular
business.It is also the time to visit
with the seller to get your questions
answered about the business itself.
|
|
|
|
Make an
Offer
If you now have your basic questions answered
and you want to proceed with purchasing this
business, it is time to make an offer, subject,
of course, to verification of all the information
you have received. The main purpose in making
an offer is to see if the seller will accept
your terms, price, and structure of the sale
itself. Remember, you will have the offer
subject to your verification of the important
information. It doesn't make sense to employ
outside advisors and go through the time and
expense of due diligence unless you can come
to financial terms with the seller.
|
Due Diligence
At this point, you hopefully have arrived
at a meeting of minds with the seller, and
you are ready to begin removing the contingencies,
performing what is commonly called due diligence.
|
 |
| |
*Insider
Tip
Unless you are completely familiar
with the type of business purchased,
it is beneficial to include as
part of the agreement that the
seller will stay with you (30
days is fair, with perhaps another
30 to 60 days of telephone consultation)
a sufficient length of time to
teach you the business - at no
charge. If you want the seller
to stay longer, it may be best
to offer to pay him or her a consulting
fee of some type. |
|
|
 |
|
Copyright
2004 Business Brokerage Press |
| |
|
|
|
|
|
