One of the first and most important subjects you should consider when thinking about buying a business is the why, what and where of the decision. Knowing why and clarifying your motivations can greatly diminish any future uncertainty you face, as you inevitably navigate the pitfalls of business ownership. Secondly, you need to know what type of business you want to buy based on your interests, skills, and financial goals. Zero in on the types of businesses, then research those industries and set realistic goals. The major listing sites such as BizbuySell.com, Bizquest.com, and others are rich with informative resources, articles and the listing themselves that can help educate you about your chosen industries. Once you know both former items, the latter or the where is easy to answer. Identify the geographical area, and whether you are willing to relocate for the right acquisition.  

Once you know what you are looking for, you can use online marketplaces, business brokers, and industry contacts to find potential businesses for sale. A simple google search for your “type of business” for sale will usually yield the largest online business for sale listing sites at the top of the search engine results, as well as local brokers. Don’t be shy to ask your accountant, attorney or other professional and financial services providers for a contact to a Business Broker in your area. Many times, they can recommend someone that will be a good fit for you. They may also know of businesses that are either in the market or preparing to go to market.  

As soon as you can, you want to gather your team of deal advisors, including a business broker, attorney, and accountant, to assist with the process. Each one of these professionals will navigate a different key step in the business purchase journey and are invaluable in making sure that the process goes smoothly and correctly for you and the Seller.   

Once you have found a business that interests you. The first step is to sign a Non-disclosure Agreement. This protects the seller and gives them the comfort level to share freely about their business. At this stage, you will conduct a preliminary evaluation of the business’s financial health, market position, and growth potential. If the business is represented by a Business Broker, there will be a Confidential Information Memorandum (CIM) or other form of overview of the business’ financials, operations, etc… enough information for you to determine if there is enough interest to meet the owner and tour the facility.  

Many buyers assume that just reviewing the preliminary information and comparing that to their preset financial and business requirements as well as their goals will give them enough information to determine whether a business is worth pursuing or not.  To some degree this is true, there are definite must haves when reviewing preliminary information. You do not want to waste your time, but a wise broker who mentored me early in my career pointed out to me once that many buyers, especially Mainstreet, identify that the business is the right “fit” for them by connecting with it and the prior owner during a tour. You may find that you know when you walk in whether it is the right fit and worth taking the time to perform exhaustive due diligence. Or not. This is not the only factor to consider of course, but it is an important one. Also, you will find that going on tours of businesses that fit your initial criteria will also help you zero in on what you should be looking for and hone that criteria. The tour is an opportunity to get to know the business, ask questions, and meet the current owners. Go armed with questions about the business operations, the owner and their plans, background, etc. Keep your eyes and ears open for things you did not know to ask.  

You have identified a business and you are interested in purchasing… it fits all your financial, operational and strategic goals and you see future opportunity. Now it is time to make an offer. Work with the seller and their Business Broker to agree on a fair price… considering the business’s valuation and any identified risks. The Business Broker working with the seller or your attorney can assist in drawing up the Offer for Purchase or Letter of Intent. Carefully consider what contingencies and conditions are in the offer to protect you if something in due diligence does not come to fruition and you decide not to purchase the business. Have your attorney do a final review of your offer before it is presented to the Seller. In most cases, the Business Broker will present the offer to the Seller and facilitate the back-and-forth counter offers.

After the Offer or Letter of Intent (LOI) is signed and terms are agreed upon, the next step is due diligence. As the buyer, you’ll thoroughly investigate the business’s financial records, legal status, and operations. The deal’s advisor will create a due diligence timeline, outlining conditions and contingencies necessary for closing. Typically, buyers review records and secure financing while avoiding actions that expose the business as “for sale”, such as discussions with the Landlord, vendors or employees. Actual transfers occur at closing, and both parties should avoid irreversible steps that cannot be easily undone in case the deal falls through. 

During due diligence, an Attorney will draft a purchase agreement and appropriate closing documents that outline all terms and conditions of the sale, as agreed to by you and the Seller. Then they will coordinate revisions from both sides until the Agreement is mutually satisfactory. You finalize the transaction by signing the necessary documents and transferring ownership on the day of closing. The Business Broker or Advisor coordinating the deal, or an Attorney will host the closing, and prepare a post-closing transition plan. 

Immediately following closing, the parties will begin to implement the post-closing transition and integration plan for a smooth transition, including training and integrating the new business into your operations. This stage varies depending on the business, the industry, etc.  

Now you have a better understanding of the steps to buying a business. You know what to expect during your acquisition journey. Whether you are an individual buyer, or a strategic acquirer, this is an exciting and rewarding journey. Take your time, be mindful and be intentional. You will get there if you can navigate the above steps successfully. I wish you the best, and should you desire to work with a seasoned professional to walk you through each step, feel free to contact me directly or set up a call below.