Key Considerations When Buying a Business
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Key Considerations When Buying a Business

Client comes into our office: “I want to buy a business.”

CAPSTONE: “What type of business are you looking for?”

Client: “I don’t know, just one that makes a lot of money.”

CAPSTONE: “How much money do you want to spend?"

Client: "Can’t I purchase one with nothing down and 100% bank and owner financing?"

CAPSTONE: "Probably not, so let's talk about why you want to buy a business."

All kidding aside, If you are planning to purchase a business now or in the future, you need to be prepared for the process. Here are our recommendations on what to consider:

Where to begin?

First, determine why you want to purchase a business. Are you tired of being an employee? Have you always felt that you had an entrepreneurial spirit? Is there an industry that you love but have never had the chance to participate in?

Next, determine your financial investment ability. What are your criteria and goals? Here are just a few of the considerations to think through before searching for your dream business:

  • Your financial investment capability
  • Geography or location of the business
  • The earnings you want from the business
  • What is the legal structure you want to create?
  • Personnel, operations, etc.
  • Will the seller stay on for a period to help with the transition?

 

Next Steps

Once you’ve defined your specific criteria, engaging experienced professionals, i.e. CAPSTONE Business Advisors, to assist you in the process is a smart move. We have the connections, the knowledge and the expertise to keep you from spending an enormous amount time and money looking on your own for your ideal business. We will provide and guide you through a custom, extensive checklist of items needed to successfully complete this process.

Here are a few considerations that will likely be included:

  • Gathering business data
  • Determining a fair market value for the business
  • Constructing a Letter of Intent
  • Helping you through the negotiation process and move toward a definitive agreement
  • Overseeing the closing and assisting with a seamless transition of ownership
  • Connecting you with other necessary players needed, such as an attorney, banker, accountant, and subject matter experts.

 

The NDA

Buying a business is very different from other types of transactions. When you find a business you are interested in purchasing, and assuming the owner is ready to exit, you will need to execute a non-disclosure agreement between you and the seller. Business owners typically do not want their employees or competitors to know they are thinking of selling. They are usually reluctant to give out their financial data to just anyone. How do they know you are qualified to buy their business?

Financing

Finally, financing is one of the most important items to have resolved before you begin your business purchase process. Much like buying a home in today’s market, getting pre-qualified is a great idea. Meet with your banker, or we can refer you to several preferred bank relationship contacts we have that specialize strictly in business loans, who can advise you on your options.

Knowing your financial ability on the front end will give you the confidence you will need when meeting and negotiating with Sellers.

These are just a few of the considerations you will need to know when purchasing a business. At CAPSTONE, we have a saying, “you can buy whatever intellect you need, but the chemistry must be there first for a transaction to occur.”

Call today to schedule a no-obligation appointment with CAPSTONE to help get you started in purchasing your dream business.