Buying a Business FAQs
No doubt about it – the thought of buying a business raises a lot of questions. As it should. Buying a business is a major decision and you don’t want to go through the process unprepared. Over the years we are frequently asked the same questions. Based on years of experience helping people like you buy businesses, we compiled this of questions and answers to help shed more light on the process of buying a business.
For more in-depth answers, or additional questions don’t hesitate to contact us. We’d be happy to schedule a complimentary and confidential consultation.
Frequently Asked Question About Buying a Business
Why should I buy an existing business?
Buying an existing business provides you with a number of advantages that help eliminate the risk of starting a new business including:
- A properly developed business plan and proven business model
- Brand recognition with an established customer base and reputation
- Immediate cash flow and therefore an immediate return on your investment
- Real operating results, as opposed to projected results
Established credit history along with vendor relationships
- An employee base that’s been trained
- Efficient operating systems, licenses and permits.
Why should I use a SB Mergers and Acquisition intermediary?
As your intermediary we’ll act as a buffer between you and any interested sellers which our clients tell us is extremely appreciated when things get tough.
Buying and Selling businesses is our specialty. We understand the process, and know how to keep the deal moving forward.
How can SB M&A help me locate and buy a business?
A SB M&A intermediary will provide you a list of local business-for-sale opportunities and help you identify businesses that suit your skill set and experience as well as your financial and lifestyle requirements. We’ll also help you make sense of the complexities of the buying process, smooth the way for negotiations between you and the seller, and work with you to ensure the due diligence and closing process are completed as quick as possible.
What are the fees associated with buying a business?
Like with real estate transaction, your brokerage fees are typically paid by the seller. However, should you ask us for a targeted search for a business that isn’t currently for sale to see if the owner is willing to consider a purchase offer, then you would be responsible for paying our intermediary fee.
What type of information do you require in order to provide me with details about a specific business?
The information needed varies depending on:
- the size of the business
- the complexity and competitiveness of the industry
- the disposition of the seller
- and other considerations.
However, at the very minimum you must provide the following before receiving any detailed information on a business for sale:
- Confidential Business Buyer Profile: A document that helps us assess business opportunities that best suit your specific background, experience, financial and lifestyle goals.
- Personal Financial Statement: You’ll also need to submit financial statements to ensure possible business opportunities suit your financial circumstances. This information is also needed to structure purchase offers and obtain financing when buying a business.
- Confidentiality and Non-Disclosure Agreement (NDA): As a prospective buyer, an NDA outlines your responsibilities and obligations concerning confidential information disclosed about a business for sale.
- Credit Check Authorization: Most sellers will request an up-to-date credit profile before disclosing confidential information to you. This is also required as part of any purchase offer that involves a financing or lease agreement.
What’s involved in the due diligence process?
Due diligence is a comprehensive process typically broken into three categories of investigation: financial, legal and operational. As your business intermediary we can walk you through the process, however we strongly urge you to consult with both your lawyer and accountant for a thorough explanation. A sample list of topics reviewed during the due diligence process are listed below:
- General Information
- Organizational Matters
- Regulations and Permits
- Intellectual Property
- Financial and Accounting Matters
- Budgets and Forecasts
- Material Agreements and Documentation
- Sales and Marketing
- Employee, Deferred Compensation and Benefits
- Environmental Matters
- Permits and Licenses
- Relations with Authorities
How much do I need down to buy a business?
When it comes to your business acquisition, lenders want you to have some “skin in the game”. Typical rule of thumb for the down payment is 30 to 50 per cent of the purchase price. Keep in mind that the lender understands that you will need some working capital to keep the business going, even though the business you’re buying should already have an immediate cash flow.
Interested in buying a business? Start the process. Contact us now