Buyer Frequently Asked Questions
Why buy a business instead of starting one?
It may take more money than time to buy a business. It takes more time than money to start one. The break-even point for buying versus starting a business is the cost to buy equipment, rent a space, pay a staff, pay for advertising, establish contractual relationships and support yourself while you are building up a customer base.
If you buy an established business, you have an income from the day you take over. You already know what can be accomplished by the business. If you start a business, you face a lot of uncertainty over the success and desirability of your product or service. Buying an existing business takes a lot of the risk out of your decision.
What is the best business to own?
Beauty is in the eye of the beholder. Most Buyers want to own a profitable, well-managed business in an industry that holds a personal interest for them. On the other hand, some Buyers may look for opportunities that offer turnaround potential, where they can apply their special skills. In general, there is no industry that is particularly better than another. That is why CII developed its proprietary “Buyer Profile.” When the profile is complete, it will help your CII Advisor recommend the right business for you.
What is done during the due diligence period?
The due diligence period is used by you to review all aspects of the business – not only the financial aspects of the target business, but competition, changes in market dynamics, available financing, and all other issues that should be considered in purchasing a business. Your accountant and attorney should review the financial and legal aspects of the purchase.
Upon the completion of the due diligence period, you and the Seller are ready for the completion of the sale. To facilitate the closing, a transaction attorney is often used. The attorney is responsible for filing the required paperwork, and ensuring that all licenses and leases are properly handled for all parties to the transaction.
Your CII Advisor is available to assist with identifying lenders, the transfer of licenses, the assignment of lease and franchise rights, and the performance of due diligence for the target business. If required CII offers business plan services to include financial projections that will generally be required by outside lenders.
What happens when I find a business I want to buy?
When one of CII’s listings interests you as a Buyer, contact a CII Advisor. The Advisor will be able to answer your questions immediately.
Once your preliminary questions are answered, typically the next step is for your CII Advisor to arrange a site visit. If your meeting goes well and you like what you see and hear, your CII advisor will help you prepare an offer based on the price and terms you designate. The offer will generally be contingent upon a review and approval of the actual books and records supporting the financial information that have been supplied. The offer is then presented to the Seller, who can approve it, reject it, or counter it with his or her own offer. The main purpose of the offer is to determine if the Seller is willing to accept the offered price and terms.
Do I need an attorney?
An experienced attorney can be of invaluable assistance in making sure that all of the legal aspects of the transaction are properly handled. Most business advisors are not qualified to give legal advice.
It is also important that the attorney be familiar with the business sale process and has the time available to handle the paperwork on a timely basis. If an attorney does not have experience in handling business sales, you may end up paying for his education. CII can provide you with names of experienced attorneys who are familiar with the business purchase and sale process.
What happens when I make a purchase offer?
A purchase contract generally includes: details of the price to be paid for the business, assets that are included in the purchase, training to be provided to you, the time period and area to be covered by any non-compete agreement, and, if there is to be financing by the Seller, the details of the financing.
If you and the Seller agree on the price and terms, the next step is for you to perform “due diligence. ” Due diligence is the examination and evaluation of risks affecting a business transaction that a prudent person might be expected to exercise. The burden is on the Buyer – no one else. A Buyer may choose to bring in other outside advisors to help or may do it on their own – the choice is solely up to the Buyer. Once due diligence has been completed the closing documents can be prepared and the purchase of the business can be completed.
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