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There are many other issues associated with valuing a business which are beyond
scope of this article and a prospective buyer is advised to read as much information on this topic as possible. Before you actually proceed with a purchase you should seek advice and guidance of competent professionals.
Next, you’ll need to start thinking about how you’ll pay for this business. This also becomes an integral part of negotiation process to arrive at a selling price. There are actually many sources of financing available to purchaser of a business and frequently buyer will use more than one of these sources:
Buyer's Personal Capital Business Seller Financing U.S. Small Business Administration (SBA) Commercial Bank Loan
In almost all sales of small businesses, there is some amount of seller financing. This amount can range from 50% to 75% of total purchase price. In most situations, a seller wants to receive as much money up-front as they can, while a buyer will want to pay out as little as possible.
Once you’ve completed negotiating selling price for business, next step is to finalize sale, take possession of business, and begin operations. Closing deal is hardest to accomplish, but usually shortest part of buying a business. After all, valuations, due diligence, and negotiations are complete and now it’s a matter of getting everything into writing.
The best situation for all parties is to follow an orderly process that will move things along in a business-like manner. The major elements of purchase and sale process are:
Binder and Earnest Money Agreement Purchase and Sale Agreement Closing (at which actual title and ownership is conveyed)
The Closing date and place are set to everyone’s convenience and all of pre-closing tasks are assigned to various parties for completion. At Closing, actual legal instruments of transfer are signed, money and/or promissory notes are exchanged, and buyer becomes new owner of business.
Well, that’s a snapshot of what it takes to buy an existing business. As involved as it may seem, it’s far less trouble than starting a new business, faster, and certainly less risky. If you have an entrepreneurial mind-set and would like to consider getting into business for yourself, even if it’s only a home-based business, I strongly urge you to consider buying an existing profitable business. There’s tens of thousands of them out there right now just looking for a new owner.
More articles like this can be found at: http://www.businessbookpress.com/articles/business_articles.htm
Mr. Russell L. Brown has been a business broker and consultant for over 25 years and has been directly or indirectly involved in all aspects of the buying, selling, brokering, and valuing of hundreds of existing companies. He is widely sought as an expert consultant and lecturer on the topic of buying, selling, and valuing businesses. More information about Mr. Brown and the books and software he has authored may be found at http://www.BusinessBookPress.com
