Buying a business

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 for the unprepared. That’s why it’s important for you to take the time to read this explanation of the process. Even if you’re a veteran in business transfers, understanding the VR process will assist you in working with our firm.

Why buy an established business?

You’re purchasing a customer base, proven need for the product at that location, and few surprises.

What are you buying with an established business?

You are buying cash flow, your initial investment, and that the business retires the debt.

Getting Started: Questions and more questions

The search for a business almost always starts with a telephone call or a visit to a web site like the one we host at VR. Sometimes the prospective Buyer is a Corporation, Private Investment Group or a sophisticated Private Investor who has a very definite idea of the type of business wanted. However, often the Buyer is a first time Buyer and is still in the formative or exploratory phase of the search. Many times a Buyer’s first question is, "What kinds of businesses do you have?"

Well, we have lots of businesses, so that’s a tough question to answer without some idea of the Buyer’s resources, skills and needs. Maybe we just listed Ford Motor Company and you, our prospective Buyer, just happen to have several billion dollars and a background in automobile manufacturing. There’s a match made in heaven, but it’s a match we can’t uncover without questioning you and learning more aboutyour background and experience. What is your dream?

So the first and most important step is telling us about you. Be patient when we ask, "How many days per week are you comfortable working?" and "Do you like having employees?" and "How much cash do you have for a down payment?" and many other questions. We’re narrowing your search and saving you time and aggravation. Our web site Buyer registration offers a message block that is a great way to narrow your search and help us help you find the business of your dreams.

Defining the search: Non-confidential Summaries

If you’re a local buyer, we will ask you to come into our office. After we’ve talked for a while, we can begin narrowing the search to a few appropriate businesses. At this point, we communicate non-confidential summaries of our exclusive listings to you in a number of ways. Since you’re viewing our web site you can see the non-confidential summaries of our exclusive listings by simply using the "Businesses for Sale" page. VR non-confidential summaries show our profile #, a description of the business, a summary of financial performance, the reasons why we think it may be a good opportunity and the asking price. We recommend that at this point you focus on the business and not on its financial performance or price. It’s far more important now to find a business type you’d enjoy owning.

Focusing on a few: Digging Deeper

At this point in your search, you’ll find yourself holding one or more non-confidential summary sheets for businesses you want to know more about. This "digging deeper" step takes your business search to a new level.

This new level is one of mutual trust and obligation between you, VR and the Seller(s) of the business(es) you’re interested in. Now you’re being exposed to the specifics about the businesses you’ve been considering and your agreement to keep this information confidential is required. Before we send you confidential information, we require you to send us your Buyer Profile and we require you to sign a Non-Disclosure Agreement. When you return these documents to us, we’ll disclose information on that particular business to you. You obtain a copy of these documents by going to the “Non-Disclosure” page and then printing the documents.

The Business Listing Details: The Facts, & More

A big part of our job on behalf of the Sellers we work with is to do the work of selling their business while affording them the time to run their business. This means that we will work with you to answer your questions about the business before we introduce you to the Seller. We accomplish this in several ways.

The most important element in this process is the VR Business Listing Details. This report on the business you’re interested in is written to give you the information you need to decide whether or not the business is right for you. A typical Listing Details of the business contains summary financial data, additional business facts like lease information, number of employees and much more. After a thorough review of the Business Listing Details and discussions with your VR representative, you will have a good understanding of the business and its operations.

The Business: Face to Face

After reading the VR Business Listing Details, reviewing financial data and touring the business you’re interested in, you should be prepared to make an offer for the business. If not, your VR representative will answer further questions and may, if indicated, set up another meeting with the business owner prior to your making an offer. This is an important step. Not only are you learning more about the business from the person who knows the most about it, you are also seeking to tell the business owner as much about you as possible since you may be seeking installment terms from the business owner. Often, Buyer credentials are presented at this time. These credentials would include a resume, financial statement and credit report.

Making An Offer:

After meeting the business owner and touring the business, the next step is making an offer for the business. Making an offer is not a 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 this is a privately held business, the Buyer is obligated to make an offer before receiving copies of the business’ internal financial records. The Buyer must understand that their offer is always contingent upon the Seller proving his or her representations. Due diligence may be costly and time-consuming, and it must be done only after an agreement on price and terms is reached.

It’s the Seller’s responsibility to prove everything to the Buyer. Put another way, your agreement on price and terms will be "non-binding" until you’ve had the opportunity to see all financial records and we have removed all contingencies.

The Offer: Terms, Contingencies, Conditions, Personal Information, Earnest Money and Due Diligence

Terms: Price, down payment and agreed-to financing (interest rate, period, etc.).

Contingencies: Approval of books and records, equipment, inventory, assignment of leases or loans and any other items that the Buyer requests to be incorporated into the structure of the agreement.

Conditions: Non-compete clauses, consulting agreements, training agreements and other relevant parts of the structure of the agreement will be done and approved prior to closing.

Personal Information: Your resume of business background and experience, your financial statement and your credit report.

Earnest Money: Your earnest money deposit check in the amount of 10% of the offered price or a minimum of $5,000. This check is not deposited until the Offer For Purchase has been signed both ways and then must be deposited in the Broker’s trust account within 24 hours of the acceptance of the offer.

Due Diligence: Clearing The Way. You and your advisors - attorney, accountant and others - will have a specified period of time (typically 7-10 days) to complete your due diligence and remove the contingencies. Should the business fail to pass due diligence, you are free to rescind or amend your Offer For Purchase. When due diligence is complete and the contingencies are removed, the contract is binding and you and the seller will be asked to sign an Authorization To Close which then allows our office to contact the closing attorney to prepare closing documents. The cost for the closing attorney is split 50-50 buyer-seller.

Financing: Working with Sellers and the SBA.

Almost every deal requires some form of financing. At VR we work with Buyers to help obtain the appropriate financing for the business being purchased. Often, this means a Seller’s Note and it also often means a bank loan guaranteed by the Small Business Administration. But whatever the financing requirements, Buyers can expect guidance and assistance from VR in this important area.

Closing

Closing typically takes approximately four weeks. After the closing attorney receives the instructions, he or his legal assistant will contact the Internal Revenue Service and local taxing agencies to verify all tax returns and that other reports are up to date and current. The closing attorney guarantees you, as a buyer, clear title to the business. Clear title means there are no outstanding liens or judgments against the business or the owner that would jeopardize your purchasing the business.

You’re In Business:

Congratulations! On the day of closing, the business is yours! There is no better feeling than being in control of your own destiny and financial independence.

When you work with VR, we 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" page and get started on your search for your part of the American dream.