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 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.
Getting Started: Questions
and more questions
The search for a business opportunity
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. But, 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 about you.
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 not just asking: We're narrowing
your search and saving you time and aggravation.
Defining the search: Non-confidential
Summaries
After we've talked for a while, we
can probably begin narrowing the search to a few appropriate
business opportunities. At this point, we communicate non-confidential
summaries of our exclusive opportunities 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 "Search
Businesses" button. 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 opportunity
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 and Confidentiality Agreement.
When you return these documents to us, we'll divulge to
you the name and address of the business you're interested
in. You obtain a copy of these documents by selecting the
“Non-Discosure”
button and then printing the documents.
The Business Profile: 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 Profile. 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 Business Profile contains a detailed
description of the business, summary financial data, additional
business facts like lease information, number of employees
and much more. After a thorough review of the Business Profile
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 Profile
and reviewing financial data, you should be preparing yourself
to make an offer for the business. Your VR representative
will answer further questions and may, if indicated, set
up a 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.
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 seeing 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 is 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
Your Offer To Purchase will consist
of the following:
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.
Your resume of business background and experience.
Your financial statement.
Your credit report (paid for by you).
And your "Earnest Money" deposit check in the
amount of 10% of the offered price. This check is not deposited
into escrow unless and until the offer is signed by both
parties.
Due Diligence: Clearing The Way. You and your advisors -
attorney, accountant and others - will have a specified
period of time to complete your due diligence and remove
the contingencies (typically 10 days). When due diligence
is complete and the contingencies are removed, the contract
is binding. Should the business fail to pass due diligence,
you are free to rescind or amend your Offer To Purchase.
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.
Escrow & Closing
Escrow typically takes about 3-4 weeks.
After escrow receives the signed instructions, the escrow
officer will contact government tax agencies for clearance
and publish your fictitious name filing, enabling you to
open business and banking accounts. Also during this time
a Notice To Creditors will be published allowing anyone
with a claim against the business to step forward.
You're In Business:
Congratulations Finally, the big day
arrives and you open the doors of your business for the
first time. There is no bigger thrill, no better feeling
than knowing that you are in control of your destiny.
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 "Search Businesses"
section and get started on your search for your part of
the American dream.
