Nine Steps To Buying A Raleigh Business
What are the steps to buying a business? Remember this, REMEMBER THIS – Once you have bought the business, it’s yours. It’s always better to do the hard work of due diligence on the front end rather than the hassle of correcting issues from a troubled business that you’ve already purchased. Remember these nine steps to buying a Raleigh business.
The process of purchasing a business can take 3-4 months or longer depending on the size of the business. On average, it takes about 1 month to negotiate an offer with a buyer, 1 month to complete due diligence, and 1 month to close the transactions. A lot happens during this time frame.
The Buyers Side
1. Find A Trusted Broker – Your business broker is going to help navigate you through the process of finding the business that fits you the best and helps you find the healthiest business that is the most profitable. The following chart shows you the steps that your professional broker will guide you.
2. Quick Look - Once your broker has you NDA (Non-Disclosure Agreement), Personal Summary and Personal Financial Report he/she will be able to send you the financials and other pertinent information about the business. This information helps you and your broker to talk and ask a lot of questions. This information also communicates to the business seller and the broker that you are serious about a purchase.
3. Negotiate - The business is like a child to the seller and they want to make as much money as they can. The buyer wants a great (profitable) business and they want to buy it for pennies on the dollar. Neither of these positions is realistic and therefore the responsibility falls to the broker to unite these polar-opposite positions.
Sometimes million dollar deals are doomed over a few thousand dollars when either side refuses to budge. The numbers don’t lie so buyers and seller alike are encouraged to see which multiple of the SDE is used for each industry. Reviewing tens of thousands of SOLD business in each industry sets prices for each business.
4. LOI - The Letter Of Intent is a legal document signed by both parties. A letter of intent is a document outlining the general plans of an agreement between two or more parties before a legal agreement is finalized.
An LOI may be used to clarify a transaction before a full contract is drawn up, to officially declare a partnership or negotiation between two parties or to clarify a mutual understanding.
5. Deposit - A deposit of 10% is usually placed in escrow once negotiations are reached. This allows a neutral third party to hold the money and to disperse according to the sales contract.
The deposit is typically given at the signature of the LOI and then deposited in escrow.
6. Due Diligence - Due diligence is a time for investigation of the business.
Review articles of incorporation, verify numbers with accountant, ongoing conversation with the owner(s), review inventory, examine real estate or lease requirements.
7. Closing - Typically 45-90 days after the buyer is engaged the closing date is set and executed. In most cases, the buyer's attorney creates and presents the closing documents.
The closing documents also layout the owner’s transition period expectations. Transfer of lease, employment offers, transfer of utilities, key exchange, business contact transfer, vendor notification, and license transfers are all details that need to be discussed and established.
8. Transition - Transfer of lease, Payroll, employment offers, transfer of utilities, key exchange, business contact transfer, vendor notification, and license transfers are all details that need to be discussed and established.
9. Breath and Celebrate - You did it! Congratulations! Whatever transition period or consulting arrangements need to be honored after the sale.
Nine Steps To Buying A Raleigh Business
There are thousands of details that have to be diligently managed during the sale of a business. This is why a trusted Transworld Business Broker of Raleigh will connect you with legal counsel, CPA's, inventory specialist and many other experts in their fields to help this process run as smoothly as possible.