HOW THE PROCESS WORKS
The information contained within our ‘What You Need to Know’ section outlines the initial points you need to consider when looking for the ideal business to buy and covers how we can help. This section will take you through the process itself from the point at which you feel you have identified the business you want to buy.
In order to get a better understanding of the business (or businesses) we have worked together to target, there will be an opportunity to meet with the sellers. The meeting with normally take place at the business location and begins with a tour of the premises. This includes both the areas that are open to the public as well as those that are reserved for employees only.
At this time the buyer and seller will both have the opportunity to ask questions of each other to ensure that the business and its sale is a good match, and to provide additional insights into the daily operation of the business that might not otherwise have been obvious from a review of the written documentation.
This is not the appropriate time for either party to negotiate the price or terms of the sale, as this can be a very sensitive topic that should only be handled between the brokers that are involved. For a sale to complete successfully the two parties need to feel comfortable with one another. Attempting to negotiate at a buyer/seller meeting can cause ill will with one or both parties and should only be handled at the time a formal offer is to be made.
MAKING AN OFFER
When you have decided which business is right for you the next step is to present an offer in the form of a purchase contract. There is more to negotiating a contract than just the purchase price and this part of the process can involve a tense negotiation period. We will handle the negotiations on your behalf and make sure all relevant areas of the deal are covered – for example, you will want to make sure that you not only have a favorable purchase price but that negotiations are focused on the terms of the sale as well.
For these reasons it is highly advisable that the buyer and seller do not negotiate the price and terms directly. It is recommended that experienced and skilled business brokers assist both parties throughout the negotiation period. Making an offer to purchase a business should not be viewed as the final step in the process. In fact, it should be noted that this is the first of several required steps to bring the buyer and seller closer to completing the transaction.
As most sales involve privately held businesses the buyer is obligated to make an offer before they are able to fully review all of the target business’ internal financial records. The buyer should understand that the offer made is always contingent on the seller being able to demonstrate the accuracy of its representation to the satisfaction of the buyer.
The offer made will include the terms of the offer itself including the price, down payment, and any financing information if applicable such as the interest rate, loan period etc. The offer will also include conditions such as covenants not to compete, any training/consulting agreements, an apportionment of the work-in-progress or any assumption of liability.
If the offer is subject to any contingencies such as approval of books and records, equipment, inventory, assignment of leases or loans, these need to be incorporated into the terms of the agreement.
In some, but not all, cases the offer document may be accompanied by the financial statement of the prospective buyer along with their credit report.
An ‘earnest money’ deposit for 10% of the offered price is required at the time the offer is accepted.
It is the prospective buyer’s duty to verify the accuracy of the seller’s representations by use of the appropriate experts, whether they be an attorney, accountant, business appraiser or other relevant professional. Any agreement between the parties remains ‘non-binding’ until the prospective buyer has been through a process known as ‘due diligence’ to verify the accuracy of the financial records of the seller, and any other contingencies have been removed.
When the buyer and seller have reached an agreement on price and terms and the purchase contract has been executed, the next stage of the process is for the buyer and their team of experts to undertake due diligence.
This is a critical time for the buyer and is when you have the opportunity to analyse the business in depth, including the financials, premises, equipment, inventory and all other aspects involved in the daily operations.
We would always recommend that you hire a CPA to properly review the business and verify that the information provided by the seller is true and accurate. The purchase contract will normally contain the standard out-clauses that allows for contingencies. This ensures that it is possible to make the contract null and void if the business does not hold up during the financial due diligence period. If the business does fail to pass due diligence the buyer may withdraw, modify, or amend the offer.
The due diligence period normally lasts 5-10 business days depending on the complexity of the business involved. When the process is completed and all contingencies are removed the contract becomes binding.
A high number of business purchases require some form of financing and we are able to help you to secure the most appropriate funding. This may involve seller financing, a bank loan, Venture Capital or Angel investment, SBA financing or funds obtained through other financing resources.
Regardless of your financing needs we can provide guidance and assistance in locating the right lender.
Your business purchase will be handled by an independent escrow company. Typically, an escrow is opened with the deposit of the buyer’s earnest money down payment. Payment of the balance due to complete the sale is generally made within 3-5 days after all contingencies have been removed or satisfied.
We can help with all activities that need to be accomplished prior to closing. This could include essentials such as creating a corporation, applying for the relevant business licenses, completing an inventory count and many other items you will need to have in place in order to be prepared to start running your business from day one.
When you work with us we will guide you along every step of the way and help to make the purchase of the business as stress free and straightforward as possible. We will take you through the process of working with all of the relevant parties that may be involved in a deal such as accountants, attorneys, banks, franchisers, landlords and others to ensure the successful transfer of the sale.
The closing is the day the transfer of the business from the seller to the buyer takes place. A few days prior to closing you should receive the relevant documents to be reviewed by you and your attorney. The day of closing will include you signing all of the required paperwork and this is when disbursement of the funds will take place.
The deal has closed and the big day has arrived! Congratulations - you are now a business owner!
In many cases there will be certain measures that will need to be completed post-closing. This may include the transfer of utilities, merchant services, and vendor applications for credit. Dependent upon what was stated in the purchase contract and closing documents the accounts receivable and accounts payable may also still need to be completed between the parties.
The training period that was agreed in the purchase contract will now begin in order to ensure the smooth transition of ownership. We recommend you take full advantage of this period to make sure you are confident in your understanding of the specifics of how the business operates and we will be on hand to offer any help or guidance needed.
You are now the owner of the business and are ready to begin your new adventure!
For investors looking to move to Florida from outside of the United States we also offer a range of services for those needing to obtain a visa. For more information regarding our visa services click here.