Steps To Buy A Business
If you want to buy a business in Florida, it is important that you understand the typical steps to Buy a Business. While all steps are not always followed in the order as described below (or may not even be applicable to certain transactions at all), more times than not, the steps below are common:
Decide you would like to buy a business
This should not be a decision that happens over night. In fact, you should understand all the potential outcomes and how it will effect you, your family, your lifestyle, and your future. As a buyer you may be tempted to begin searching for businesses for sale without doing any preparation. You should work with a Florida business broker in order to determine how much money you would have available with different types of financing in order to purchase a business. Our business brokers can also help you create a buyer’s packet that can be given to sellers, financial institutions and landlords when appropriate in the buying process. You will most likely be asked to fill out a Personal Financial Statement that will help demonstrate your ability to acquire a business. Note that while you will be qualifying a business to make sure it fits what you are looking for, the Seller, the Seller’s Landlord, a Visa Attorney, or Franchisor will also be doing the same diligence on you to make sure YOU are qualified
Search for a business that interest you
Next, we can begin identifying business opportunities available that are best suited for you based on your skills, experience and interests. Together, we can search through consumer business for sale databases and professional databases, as well as seek businesses that are not presently officially available for sale. After signing confidentiality agreements and gathering preliminary information on the businesses that best meet your criteria, we can start analyzing which businesses are best to pursue. This process involves signing of confidentiality agreements for each prospect business. Confidentiality is the most important part of any deal, and understand that before ANY information is provided, you will be required to fill out a NDA/CA, and you are liable for any damages that occur to a business based on your negligence in breaking the rules of confidentiality.
Review the business(es).
to decide if it meets your needs and financial capacity. A more in depth due diligence period will exist, but it is important that you do as much up-front research as you can to vet the business you inquire about.
Have a conference call or in-person meeting with the seller/owner of the business.
If there is no integrity between a Buyer and Seller, the deal will never get to the closing table. Ensuring an amicable relationship with both parties will create trust, and a sense of cooperation that allows the deal to progress. Compatibility is usually determined only after a Buyer and Seller are able to meet face to face. To better understand the businesses that we have now targeted, you will have the opportunity to meet with the sellers of those businesses. The meeting will usually begin with a tour of the business. This includes both the areas opened to the public as well as the areas that are reserved for employees only. The buyer and seller will both have the opportunity to ask questions of each other to ensure that the business and the sale is a good match. This is not the appropriate time to negotiate price and terms of the business, as this can be a very sensitive topic that should only be handled between the broker or brokers involved. To successfully transfer ownership of a business between parties, the two parties need to feel comfortable with one another. Negotiations at a buyer/seller meeting can cause ill will with one or both parties and should only be handled in the offer stage.
Make an offer which is presented to the Seller.
When you decide which business is right for you, we can assist you in putting forth an offer on the business in the form of a purchase contract. This process could involve a tense negotiation period. There is more to negotiating a contract than just the purchase price. You will want to make sure that you not only have a favorable asking price, but that negotiations should be focused on the terms of the sale as well. It is highly advisable that the buyer and seller do not negotiate the price and terms directly. It is recommended that experienced and skilled Florida business brokers assist both parties with negotiations.
The offer is accepted, or a counter offer is proposed.
Mutual acceptance of the final offer.
Escrow Deposit is made, Due Diligence begins.
After a purchase contract has been executed, it is time for the Buyer to perform due diligence on the business. This is a critical time. This is when you have the opportunity as a buyer to analyze the business in depth, including the financials, equipment and other aspects of the business. It is important to hire an accountant/CPA and possibly other professionals to properly review the business to verify whether that the information the Seller provides is true and accurate. There normally exist standard out-clauses in the purchase agreement 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.
All other contingencies of the contract are met (lease, visa, franchise, etc.), and the closing date is addressed.
Aside from the Due Diligence, there are often other contingencies that are mostly revolved around qualifying the candidate. The Landlord has to accept the new prospect Buyer. If the offer is contingent upon a Visa approval, the respective countries’ embassy must issue the Visa to the candidate. If a franchise is involved in the deal, the Franchisor must approve the candidate as well.
Closing documents are prepared by the Buyer and Seller’s Attorney’s.
These documents are constructed based on the nature of the deal by a 3rd party attorney that represents the transaction, not the Buyer or Seller. These documents are typically provided before closing with enough time for the Buyer and the Seller to consult their private attorneys (if they desire). These documents sometimes include, but are not limited to: Closing Agreement, Closing Statement, Buyer/Seller Indemnification, Bill of Sale, Assignment of Purchase Agreement, Broker/Closing Attorney Disclosures, Security Agreement, Buyer/Seller’s Affidavit, Promissory Notes, Schedule A of Equipment List, Guaranty, Document Stamp Recording Documents, Covenant Not To Compete, Asset Allocation Agreement, etc.
Inventory is taken, and a final walk-through is conducted.
The day of closing, typically in the morning or at some time prior to the closing appointment, the Buyer and Seller will meet at the business location (if applicable), and a final inventory amount will be collected (if applicable). The Buyer and Seller will also walk through the location and ensure that all items that are conveying in the sale (if applicable) are still working and present.
Preperation for Closing & Ownership
During the contract period your Boss Group business broker will guide you through the entire process including working with landlords, franchisers, banks, attorneys, accountants and others in order to make the transfer of sale successful. Your Florida Boss Group business broker will develop a customized checklist of all activities which need to be accomplished prior to closing. This could include essentials such as creating a corporation, applying for a Florida Department of Revenue sales certificate, obtaining proper licensing, completing an inventory count and many other items you will need in order to complete the sale in order to be prepared to start running your business.
A closing takes place.
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 closing documents to be reviewed by you and your attorney. The day of closing will include the signature of pertinent paperwork. Disbursements of funds take place. It should be an exciting day for you as the buyer and for the seller.
Many times there will be certain measures that will need to be completed post closing. This may include transfer of utilities, merchant services, and vendor applications for credit. According to what was stated in the purchase contract and closing documents, accounts receivable and accounts payable may still need to be completed between the buyer and seller post closing.
But most importantly, our experienced Florida Business Brokers will hold your hand and guide you through each and every step of the process to help buy a business. Click here for a list of Buyer Services that our Brokers offer to help you Buy a Business.