Finding the right business
While searching can be straightforward, be prepared for the process. Understand the commitment involved and assemble a team of advisors (lawyer, accountant) to guide you.
Step 1: Before diving in, take a step back and consider:
● Your interests and skills: What industry are you passionate about and have the skills to succeed in?
● Products or services: What can you confidently sell and market? Choosing a business that aligns with your strengths will make ownership more enjoyable and successful.
Step 2: Get expert help
Consider hiring a business broker. They act as your guide throughout the buying process. Their experience includes both buying and selling businesses, giving them a well-rounded perspective. They can help you:
● Negotiate the purchase
● Draft and sign contracts
● Find businesses for sale through their network
Step 3: Set up goals & Plan before you shop
Don’t jump into your search blind. Set clear goals to streamline your search process:
● Budget: Determine how much you can comfortably afford to spend.
● Industry & Size: What kind of business are you interested in (restaurant, retail, etc.) and how big should it be (number of employees, revenue)?
● Location & Staff: Where do you want to operate, and do you need existing staff?
● Having clear goals will help you find the perfect business opportunity.
Step 4: Searching business on sale
Step 5: Submit Offers:
Following a thorough review of the offering memorandum and a meeting with the business owner, schedule site visits for businesses that align with your criteria. This allows you to assess the operations firsthand. If a business impresses you, submit a contingent offer outlining the terms under which you’d move forward with the purchase. A successful offer initiates the next phase of the buying process.
Step 6: Due Diligence: Protecting Your Investment
Before finalizing the purchase, it’s crucial to thoroughly examine the business. This process, called “due diligence,” involves a team of professionals (lawyers, accountants) verifying the information provided by the seller. Here’s what they’ll typically look at:
● Business Legalities: Licenses, permits, and formation documents ensure the business operates legally.
● Environmental Issues: Environmental inspections reveal any potential liabilities.
● Agreements and Assets: A review of contracts, leases, and a physical inventory confirms the business’s ownership and obligations.
● Financial Health: Past financial statements and bank statements provide a clear picture of the business’s financial performance.
● Debt and Claims: A lien search uncovers any outstanding debts or claims against the business.
● Employee Restrictions: Non-compete agreements prevent former owners from competing with you. By conducting thorough due diligence, you can make an informed decision and protect yourself from unforeseen problems.
Step 7: Closing the deal and moving forward
With all supporting documents, leases, and contingencies finalized, you’re ready to close the deal! This signifies the official transfer of ownership. Congratulations – you’re now a business owner! The next step is a smooth transition period, where you’ll take the reins and ensure a successful handover of operations.