Buying A Business

Unless you have bought or sold a business in the past, you'll find that buying a business can be a confusing and even trying experience for the unprepared. That is why it’s important for you to take the time to read this explanation of the process. Even if you are a veteran in business transfers, understanding the process we follow will assist you in working with our firm.

Before we can help you find a business there are a few questions you will need to answer so we can learn more about you, narrow your search, and save valuable time for all parties involved. Before we go through the steps of buying a business, here are some preliminary questions for you to consider:

How much money do I have to put down on the business? The amount of money available for a down payment and the liquid availability of these funds is a very important consideration. Generally, you should have at least a minimum of 50% of the selling price available or be certain that you can obtain the necessary funds within seven business days. If your money is tied up in real estate, you will need to liquidate before we can begin the discovery process and start showing you businesses. Good businesses sell fast and it is important to be prepared. You also want to budget enough money for working capital. A basic financial statement will help us determine your financial picture and purchasing power.

When do I want to buy? We will need to know if you are looking to buy immediately or just thinking about it for the future. In order to be able to take advantage of good business opportunities when presented, you need to have the ability to be decisive and move forward. Working with us requires you to be a serious buyer and be ready to make a decision once you find the business you like.

What types of businesses interest me? As a new business owner you will want to make sure you buy a business that is fun for you. If you are going to work hard, it’s important to make sure you enjoy what you do. You will have to assess your interests, skills, experience, and capabilities to determine the right business for you.

Want to buy a good business at a great price?

Order your copy of The Business Buyer Report.

After answering these questions and you have identified the business opportunities that appeal to you, we will provide general business summaries of our exclusive opportunities to you. Since you are viewing our web site you can see the summaries of our listings by simply using the Find A Business link, or you may:

As a FREE subscriber, you will automatically be notified as new listings become available, and as you become interested in specific opportunities, we will provide general business summaries for your review .

Our summaries will show our profile number, a description of the business, a summary of financial performance, the reasons why we think it may be a good opportunity and the asking price. Early on, as you search for listings that appeal to you, focus on the business and not on its financial performance or price. It's more important to find a business type you will enjoy owning than to eliminate a good opportunity by passing early judgment.

As you continue your search, you will find yourself reviewing one or more business summaries you want to know more about. This "digging deeper" step takes your business opportunity search to a new level.

This new level is one of mutual trust and obligation between you, us, and the Sellers of the businesses you're interested in. Now that you are exposed to the specifics about the businesses you have been considering, your agreement to keep this information confidential is required. Before we send you confidential information, we require you to send us your Buyer Registration Packet, which includes a Non-Disclosure and Confidentiality Agreement and Buyer Profile.

When you return these documents to us, we will divulge to you the name and address of the business you're interested in, along with an informative business profile for your review. You can obtain a copy of these documents by selecting the Buyer Registration link, then print the documents so you may complete and fax directly to our office.

A word about confidentiality. Selling a business must be kept very confidential as any breach may cause employees of a business to leave, competitors to use it to their advantage, or customers to take their business elsewhere – especially if they find out before the seller introduces them to a new buyer. We have a fiduciary responsibility to our sellers to only show businesses to those buyers who will abide by the confidentiality guidelines. We take confidentiality very seriously and it is important that you do as well.

Want the inside scoop on buying a business?

Order The Business Buyer Report.

After reading a Business Profile you like and reviewing financial data, you should be preparing to make a possible offer on the business. We will answer further questions and may, if indicated, set up a meeting with the business owner prior to your making an offer. This is an important step. Not only are you learning more about the business from the person who knows the most about it, you are also seeking to tell the business owner as much about you as possible since you may be seeking installment terms from the business owner. Often, Buyer credentials are presented at this time.

Our company, the seller and yourself will often be present during these initial meetings unless we ask you to initially view the business on your own. If you go on your own, you may view the business with your spouse, friend, or trusted advisor. You will go in as a customer, order something (if appropriate), and just observe the business. While visiting, it is very important that you do not speak with anyone or ask questions of the business owner, employees or seller. This could break the confidentiality guidelines. You are only to ask questions once we have set up an official meeting with the seller.

After meeting the business owner and touring the business, the next step is making an offer for the business. Making an offer is not a final step. In fact, it should be viewed as the first of several steps, each of which bring the Buyer and Seller closer to completing the transaction.

Since this is a privately held business, the Buyer is obligated to make an offer before seeing the business' internal financial records. The Buyer must understand that their offer is always contingent upon the Seller proving his or her representations. Due diligence is costly and time-consuming, and it must be done only after an agreement on price and terms is reached.

It's the Seller's responsibility to prove everything to the Buyer. Put another way, your agreement on price and terms will be "non-binding" until you've had the opportunity to see all financial records and we have removed all contingencies.

So how do you determine the right price to ask for the business? Imagine a triangle with three equal sides. Each corner has a label. The labels are Price, Terms, and Cash Flow. The triangle represents "The Deal" or the potential purchase. The deal can stand as long as it is standing on two of the three sides. For example, if the price of a business is high and has strong cash flow to support it, then the seller should be willing to offer terms that are favorable to the buyer. In retrospect, if the price of the same business is low and is considered to be a good value, then the buyer must be willing to accept terms that are favorable to the seller. Always remember that a good deal must benefit both buyer and seller and no two deals are ever the same.

A note on low-ball offers. It is understandable that you would want to get the business for a good deal, but it is important to realize that making a low offer and playing it back and forth will only kill the process. Eventually the seller will be tired of it and ask us not to allow you to make any more offers. It is important to ask for a price that is fair for both parties.

Terms. Price, down payment, and agreed-to financing (interest rate, period, etc.).

Contingencies. Approval of books and records, equipment, inventory, assignment of leases or loans and any other items that the Buyer requests to be incorporated into the structure of the agreement.

Conditions. Non-compete clauses, consulting agreements, training agreements and other relevant parts of the structure of the agreement.

Buyer Qualifications. Resume of Business Background and Experience, Financial Statement, and Credit Report (paid for by buyer)

Good Faith Money Deposit. Earnest money paid by check in the amount of 10% of the offered price. This check is not deposited into escrow unless both parties sign the offer.

Want to negotiate a great deal?

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You and your advisors - attorney, accountant and others - will have a specified period of time to complete your due diligence and remove any contingencies. When due diligence is complete and the contingencies are removed, the contract is binding. Should the business fail to pass due diligence, you are free to rescind or amend your Offer To Purchase.

A word on your expectations of professional advisors: It is important to make certain the professionals you retain are transactional and specialize in business transactions and closings. Attorneys and accountants that specialize in other practice areas are not necessarily best suited to represent you when buying a business. We highly recommend that you work with an attorney and/or accountant to advise you on matters pertaining to business law and tax issues, but please realize that they are not in a position to advise you on whether to buy a business or not, here’s why. The accountant will be looking for the perfect business in the financials and the attorney will also be looking for the perfect business on paper. Although both are a necessary part of the process, the truth is, the perfect business does not exist.

Your opportunity as a buyer is to see the weaknesses of your new business and determine how you can make it better. This is something you will only see. These are opportunities you should be able to recognize right away. Should you need further guidance with your decision, we suggest consulting a friend or colleague who has bought or owns a successful business. He or she will know what to look for and can advise you from an entrepreneurial approach.

Network Business Brokers works with several corporate attorneys and accountants that are experts in handling business transfers and tax matters and will represent you properly. Please take a look on our Professional Partners page for a list of professionals to further assist you.

Almost every deal requires some form of financing. We work with Buyers to help obtain the appropriate financing for the business being purchased. Often, this means a Seller’s Note or other form of creative financing. Whatever the financing requirements, Buyers can expect guidance and assistance from us in this important area.

Congratulations! Finally, the big day arrives and you open the doors of your business for the first time. There is no bigger thrill, no better feeling than knowing that you are in control of your destiny.

At Network Business Brokers, we will guide you along the way and help make your transition to business owner stress free and simple. If you haven’t already done so, we encourage you to

and be automatically notified as new listings become available. You'll have the advantage of viewing listings before the they go public!

We look forward to helping you get started on your search for your part of the American dream!