It is advisable to have an attorney review the legal documents. It is important, however, that the attorney you hire is familiar with the business buying process and has the time available to handle the paperwork on a timely basis. If the attorney does not have experience in handling business sales, you may be paying for the attorney’s education. Mill Creek has access to attorneys who are familiar with the business buying process. An experienced attorney can be of real assistance in making sure that all of the details are handled properly. However, keep in mind that many attorneys are not qualified to give business advice. Your attorney will be, and should be, looking after your interests; however, you need to remember that the seller’s interests must also be considered. If the attorney goes too far in trying to protect your interests, the seller’s attorney will instruct his or her client not to proceed. The transaction must be fair for all parties. The attorney works for you, and you must have a say in how everything is done.
Certainly, you need adequate capital to buy the business and to make the improvements you want, along with maintaining some reserves in case things start off slowly. You need to be willing to work hard and, in many cases, to put in long hours. Unfortunately, many of today’s buyers are not willing to do what it takes to be successful in owning a business. Too many people think they can buy a business and then just sit behind a desk and work on their business plans. Owners of small businesses must be “doers.”
When you find a business, the business advisor will be able to answer many of your questions immediately or will research them for you. Once you get your preliminary questions answered, the next step is for the business associate to prepare an offer based on the price and terms you feel are appropriate. This offer will be subject to your approval of the actual books and records supporting the figures that have been supplied to you. The offer is then presented to the seller who can approve it, reject it, or counter it with his or her own offer. If you and the seller agree on the price and terms, the next step is “due diligence.” The burden is on you – the buyer – no one else. You may choose to bring in other outside advisors or to do it on your own – the choice is yours. Once you have checked and approved those areas of concern, the closing documents can be prepared, and your purchase of the business can be closed.
There have been many surveys taken in an attempt to answer this question. Most surveys reveal the same responses, in almost the same identical order of priority. Here are the results of a typical survey, listed in order of importance:Here are the results of a typical survey, listed in order of importance:
It is interesting to note that money is not at the top of the list, but comes in fourth.
Obviously, you want to consider only those businesses that you would feel comfortable owning and operating. “Pride of Ownership” is an important ingredient for success. You also want to consider only those businesses that you can afford with the cash you have available. In addition the business you buy must be able to supply you with enough income – after making payments on it – to pay your bills. However, you should look at a business with an eye toward what you can do with it – how you can improve it and make it more productive and profitable. There is an old adage advising that you shouldn’t buy a business unless you feel you can do better than the present owner. Everyone has seen examples of a business that needs improvement in order to thrive, and a new owner comes in and does just that. Conversely, there are also cases where a new owner takes over a very successful business and not soon after, it either closes or is sold. It all depends on you!
An existing business has a track record. The failure rate in small business is largely in the start-up phase. The existing business has demonstrated that there is a need for that product or service in a particular locale. Financial records are available along with other information on the business. Most sellers will stay and train a new owner and most will also supply financing. Finding someone who will teach you the intricacies of running a business and who is also willing to finance the sale can make all the difference.
A professional business intermediary can be helpful in many ways. They can provide you with a selection of different and, in many cases, unique businesses, including many that you would not be able to find on your own. Approximately 90 percent of those who buy businesses end up with something completely different from the business that they first inquired about. Business intermediaries can offer you a wide variety of businesses to look at and consider. Business intermediaries are also an excellent source of information about small business and the business buying process. They are familiar with the market and can advise you about trends, pricing and what is happening locally. Your business intermediary will handle all of the details of the business sale and will do everything possible to guide you in the right direction, including, if necessary, consulting other professionals who may be able to assist you.