Buying your own business can be a complicated procedure. Throughout the buying process, it’s important to keep an open mind while searching for a business that will fit your needs, talents, skills and lifestyle. A business broker has many different types of businesses for you to consider; however, you need to remember that there is no such thing as that “perfect” business. Another vital thing to keep in mind is that at some point you must be able to make the “leap of faith” that separates you from being a “looker” to a “doer.” This isn’t easy, but it must happen if you are ever going to be in business for yourself. The following discussion of other key issues may help in the process:
Understand that in looking at small businesses, you will have to dig out a lot of information. Small business owners are not known for their record-keeping. You want to make sure you don’t overlook a “gem” of a business because you don’t or won’t take the time it takes to dig out the information you need to make an informed decision. Try to get a understanding of the real earning power of the business. Once you have found a business that interests you, learn as much as you can about that particular industry.
Furthermore, don’t try to push the seller to the wall. You want to have a good relationship with him or her. They will be teaching you the business and acting as a consultant, at least for a while. It’s all right to negotiate on areas that are important to you, but don’t negotiate over a detail that really isn’t key. Many sales fall apart because either the buyer or the seller becomes stubborn, usually over some minor detail, and they refuse to bend.
Letter of Intent: Once a Letter of Intent (LOI) is signed, the real work begins. You need to meet with a banker to discuss financing options. Start the due diligence and contact a business attorney to prepare the Purchase Agreement.
The vast majority of small business transactions are financed by the Small Business Administration SBA. The bank is looking for buyers with experience in the industry and a good credit score. This is where Empire can substantially help, we know of lending organizations that are local and outside of the Cleveland area that specialize in business acquisition funding. These sources are very often companies that specialize in funding certain types of businesses, or businesses operating under unique conditions.
This is the process where you and/or your accountant will verify the accuracy of certain financial data and gain a greater, more detailed understanding of the business.
While you are completing the due diligence, your attorney will prepare a Purchase Agreement, which will include the documents required to complete the transaction.