Buying A Business:
It's A Brand New Ball Game
Unless you've bought or sold a business in
the past, you'll find that buying a business
can be a confusing and even trying experience.
That's why it is important for the prospective
buyer to be knowledgeable about the process
involved in buying a business. Thoroughly understanding
the process will assist even a veteran of business
transfers in working with our company.
Getting Started: Questions And More Questions
Finding a business opportunity usually starts
with researching local newspapers, placing telephone
calls or visiting web sites like the one we
host. The prospective Buyer may be a Corporation,
Private Investment Group or a sophisticated
Private Investor who has a very definite idea
of the type of business wanted. On the other
hand, many first time buyers are still in the
formative or exploratory stage of their search.
Frequently that Buyer's first question is, "What
kinds of businesses do you have?".
Although we have many business listings, that
question can only be answered properly when
we have some idea of the prospective Buyer's
resources, skills and needs. For example, if
we just listed Ford Motor Company and the prospective
Buyer has several billion dollars in available
funds and a background in automobile manufacturing,
that would be a match made in heaven. But that
perfect match would never have occurred unless
we ascertained pertinent information regarding
the prospective Buyers background, resources
and objectives in advance.
The first and most important step is for the
business Broker to learn about the prospective
Buyer. When we ask, "How many days per
week are you comfortable working?", “Are
you planning to work alone or hire employees?"
or "How much cash do you have for a down
payment?", along with other questions,
we are gathering the information necessary to
match the prospective Buyer to an appropriate
business opportunity. We are also narrowing
the search and saving the prospective Buyer
time and aggravation.
Defining The Business Opportunity Search
After the search has been refined to businesses
which fit the prospective Buyer's criteria and
requirements, we can communicate non confidential
summaries of our business listings to the prospective
Buyer in a number of ways. One way is for the
prospective Buyer to view our web site and access
the non-confidential summaries of our business
listings by simply clicking on the "Businesses
For Sale" page. This page will provide
our business opportunities lists, a description
of each business, financial details and the
asking prices.
Focusing On The Right Business Opportunities
During the search, the prospective Buyer will
receive multiple lists of interesting business
opportunities. At this stage the business opportunity
search moves to a new level involving the necessary
disclosure of confidential information relevant
to the purchase or sale of any business.
The new level is one of mutual trust and obligation
between the prospective Buyer, our company and
the Seller(s) of the business(es) of interest.
Confidentiality when buying a business protects
the prospective Buyer from having anyone such
as an employer, employees, or the competition
discover about the proposed acquisition prematurely.
It also protects the Seller against unnecessary
problems with customers, employees, vendors,
competitors, landlords, bankers, creditors,
etc.
As a result, all prospective Buyers are required
to sign a Non-Disclosure and Confidentiality
Agreement before receiving sensitive confidential
information. This document may be viewed and
retrieved by clicking the “Confidentiality/Non
Disclosure Form” and then printing
the documents.
The Business Profile: The Facts
An important element in the purchase process
is the business profile. This report on the
business offered for sale is written to provide
information that the prospective Buyer can review
and evaluate in determining the suitability
and desirability of the business opportunity.
A typical Business Profile contains a detailed
description of the business, a summary of financial
data and additional business facts such as lease
information, number of employees, inventories,
pending and operative contracts with vendors
and customers and other pertinent information.
Following a thorough review of the Business
Profile and consultations with the business
broker, the prospective Buyer will have a solid
understanding of the business, its operations
and potential for continued future success.
Face to Face Meeting
After reviewing the Business Profile, financial
data of the business and the business premises,
if the prospective Buyer determines that the
business presents a desirable opportunity the
prospective Buyer should be prepared to make
a purchase offer. In some instances, it may
be possible to arrange a face to face meeting
between the prospective Buyer and the Seller
which may provide additional insights into the
operation of the business not otherwise obvious
from a review of written documentation.
Making An Offer
After meeting the business owner and touring
the business, the next step is to present an
offer of purchase for the business. Making the
offer is not, however, the final step. In fact,
it should be viewed as the first of several
steps, each of which bring the Buyer and Seller
closer to completing the transaction.
Since most sales involve privately held businesses,
the Buyer is obligated to make an offer before
actually reviewing the business' internal financial
records. The Buyer should understand that its
offer is always contingent upon the Seller demonstrating
the accuracy of its representations to the prospective
Buyer’s satisfaction.
It is the prospective Buyer's duty and obligation
to verify the accuracy of the Seller’s
representations by retaining attorneys, accountants,
business appraisers or other professionals.
Any agreement between the prospective Buyer
and Seller is “non-binding” until
the prospective Buyer has exercised due diligence
in verifying the accuracy of Seller’s
books and records and all contingencies have
been removed.
An Offer To Purchase will consist of the following:
Due Diligence
The prospective Buyer and its advisors, attorneys,
accountants, business appraisers and other professionals
will have a specified period of time to complete
a thorough review of the Seller’s books
and records, inspect the business premises and
take other appropriate steps to verify the Seller’s
representations and remove all contingencies
(typically 5-10 days). The prospective Buyer
and his advisors must utilize due diligence
in completing their review of Seller’s
business in a timely manner. When the due diligence
process is completed and all contingencies are
removed, the contract becomes binding. Should
the business fail to pass due diligence review,
the prospective Buyer may withdraw, modify or
amend the Purchase Offer. The Due diligence
procedure is costly and time-consuming. It is
only initiated after the respective Buyer and
Seller have reached an agreement on price and
terms.
Financing
The majority of business purchase transactions
require some form of financing. We work with
our Buyers to secure the appropriate financing.
This may involve Seller's financing, bank loan,
Venture Capital financing, Angels financing (private
investor), SBA financing and funds obtained
through other financing resources. Regardless
your financing requirements, we will provide
guidance and assistance in locating right lender.
Escrow & Closing
Your business purchase will be handled by
an independent escrow company. Typically an
escrow is opened with the deposit of the Buyer’s
earnest money down payment, generally within
three(3) to five(5) days after all contingencies
have been removed or satisfied. The average
escrow will close in one(1) to four(4) weeks
if there are no recorded liens against the business.
A Cashier’s check will be required for
the amount due at closing of escrow.
Congratulations!! You’re In Business
The escrow has closed and the big day has
arrived. The former prospective Buyer is now
owner of the business. A new adventure is at
hand. You are now in control of your own destiny.
When you work with us, we will guide you along
the way and help make your transition to business
owner stress free and simple. So, now is the
time to go back to our “Businesses
For Sale" section and get started on
your search for your part of the American dream.
For More Information Call:
Cheryl Yamamoto, Broker/President
468 N. Camden Drive
Second Floor
Beverly Hills, CA 90210
Beverly Hills Office: (323) 951-9999
Beverly Hills Fax: (323) 951-9910
3600 Wilshire Boulevard
Suite 1903
Los Angeles, CA 90010
Los Angeles Office: (213)
251-9920
Los Angeles Fax: (323) 431-0160
E-mail: cheryl@y2bizbrokers.com
E-mail inquiries will receive a response within
one business day. Please provide business or
home telephone number.
