Buying a Business
Tips for potential business mergers and acquisitions
A needle in the haystack! or A
diamond in the rough , both popular saying s apply to what s involved in
finding your ideal company to buy! Any seasoned business buyer will tell
you that finding viable companies that can be purchased for reasonable
terms is a numbers game . Thousands of company purchase candidates
defined, that lead to hundreds of contacts to be made, resulting in tens
of acquisition conversations that hopefully lead to ONE company acquisition!
Many merger and acquisition veterans will tell you It takes 100 potential
opportunities to get one good deal a numbers game. At
any point in the business buyer s purchase process, for any number of valid
or invalid reasons, either the business buyer or the business seller can
call off the potential deal. Most potential business mergers and acquisitions
pursuits do fall apart. The human and financial costs to both parties involved
can be significant, sometimes devastating.
Start thinking about buying an established
business if you want to avoid the immense risks involved in starting one.
Not everyone wants to start a business from scratch, and buying a business
with the infrastructure in place lets you focus on building it up, as opposed
to getting a new business off the ground. This is not to say that it s
easy to buy an existing business; it s a fairly complicated process throughout
which you need to know exactly what you re doing. First off, decide that
you do want to buy before you begin your research. This way you will look
at options more carefully. A particular business may not be exactly what
you re looking for, but if you re sure that you do want to buy, then you
won t brush it off immediately, without first considering how you might
grow with it. Business Broker s deals with a wide range of businesses and
will surely help you make up your mind quickly. Talk to the people in your
life who are likely to be affected by the venture. Let them know the hours
that you are likely to have to work and the risks involved. You might need
their support if you initially go through a rough patch.
Using a Broker: It would be
more prudent to use the services of a broker in buying your business. All
the important groundwork in terms of research would already have been done.
And, you can focus on finalizing the deal. A broker will handle all those
complicated negotiations which you may just find too much to handle. And,
when things turn unpleasant you can leave it all to your broker. Brokers
are supposed to have systems in place to take care of deals. The sale is
usually a time of some stress for both the buyer and the seller, so having
someone to put everything together and take care of the paperwork is very
helpful. You will appreciate a broker s services as it will allow you to
concentrate on getting a worthwhile deal, and not have to worry about whether
all the documents -and there are a lot of them- are in order. Of course,
your broker will charge you a substantial commission, but it will all be
worthwhile if you get the deal you want.
Business Essentials: Once
you figure out your particular area of interest, think about the size of
the business that you want to buy, the location of prospective sellers
etc. Know your financial resources so that you don t waste time looking
at businesses that are beyond your reach, even if you have always fantasized
about being a ship-builder. Identify your strengths. Are you good at sales?
Operations? Look out for a business that is in a position to benefit from
your particular strengths. Once you ve identified a business that you want
to buy, make contact with the seller but hire professionals i.e. accountants,
attorneys, etc. to take care of different aspects of the purchase.
Allow yourself a gut instinct about the
seller and the business. Feel free to ask why they want to sell the business,
and evaluate your decision based on their reasons. It might just reassure
you that you should go ahead with the deal.
Company Valuation: There are
many methods of valuing a company, and it is up to the seller to decide
how to go about it. Make sure the price is a fair representation of how
valuable the company is likely to be to you. It is obviously disadvantageous
to you if a non-performing company that is heavy in assets is priced based
on the net value of its assets. The asking price is negotiable. Even in
a situation where the seller is firm on her price, enquire as to the method
of valuation and challenge it if you think it leaves you with an unfair
deal. While negotiating, be prepared to challenge the seller with facts
and statistics. Find out what specific concerns the seller has about the
deal, and address them. Be sensitive to the fact that selling a business
can be an emotional process but at the same time make sure that you don
t end up paying for its sentimental value.
Financing the Deal: To finance the
deal, seller financing is probably the best option available to you. You
won t get a bank loan without offering 100% collateral. The Small Business
Administration does offer some financing but only for deals that meet a
strict set of criteria. The good thing about seller financing is that it
shows that the seller is being serious and honest about the deal, and is
not trying to offload an ailing business onto you. It shows that he has
enough faith in the business he is selling to share the risk involved in
running it with you. There s no better way to be sure that a business is
really worth buying. Seller financing also allows for far greater flexibility
than any other kind of financing. Most people who start looking for a business
to buy never actually end up buying. If your first deal doesn t come through,
don t let it deter you from looking for other businesses. Learn from the
experience and use it to sharpen your skills so that the next time around,
you know exactly what you want and how to go about getting it.
Services
1. Initial Consultation - You will
have a one-on-one via phone or in person with a broker in your area to
discuss all of your questions and concerns regarding the business buying
process. Our brokers are trained to help you with business concerns as
well as personal concerns. We realize that this is not only a financial
decision, but a lifestyle decision as well.
2. Buyer Profile - Once all of your
concerns have been addressed and you have signed a buyer registration agreement,
your Business Broker will create a buyer profile by which he/she can search
for the exact type of business you are looking for.
3. Viewing Listings - Once we have
entered your criteria into our database, our computer will generate matches.
Your professional business broker will then go with you to take a look
at the listing and address any questions you may have.
4. Offer To Purchase - If one of
these businesses fits what you are looking for and you have had a chance
to think about making an offer (sometimes you may have to make several
visits to the business to be certain), your broker will help you fill out
an offer sheet. This sheet details the price and terms at which you would
like to purchase the business. Here the experience of your broker will
help you in making the best offer.
5. Due Diligence - Once the offer
has been accepted, the buyer conducts a period of research on the business.
Basically, due diligence is the process by which you work with the seller
to verify the financials of the business as well as a period in which you
learn the inner workings of the business. This process typically takes
two weeks. A buyer may want to bring in his/her attorney or CPA to help
during this phase of the purchase. Your broker will be available to assist
you in the due diligence process in every way.
6. Contract & Closing - Following
a successful due diligence period in which all of your concerns have been
addressed, a contract will be drawn up between yourself and the seller
of the business. Typically this is done between your attorney and that
of the seller. If the contract meets all contingencies you have set forth,
it can be signed and a closing date set. At closing, the business will
officially change hands and you will have completed the buying process.
Keep in mind that our brokers are here for you every step of the way to
ensure that you are making informed decisions.
Author-Bio: Matt Bacak, The Powerful Promoter
and Entrepreneur Magazine e-Biz radio show host, became a "#1 Best Selling
Author" in just a few short hours. He has helped a number of clients target
his specialty, opt-in email direct marketing systems. The Powerful Promoter
is not only a sought-after internet marketer but has also marketed for
some of the world's top experts whose reputations would shrivel if their
followers ever found out someone else coached them on their online marketing
strategies. For more information, visit Bacak's site at http://www.powerfulpromoter.com
or sign up for his Powerful Promoting Tips at http://www.promotingtips.com
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