Expert advice for buying an existing business

  Success in business often comes from managing money and people well. Choose a business you enjoy, that suits your lifestyle and offers a product or service you're passionate about. Many focus only on potential earnings, then regret it when they work 80-hour weeks with no time to enjoy their income. Knowing your desired lifestyle is crucial. 

 How much are you aiming to earn? Whether your goal is $100,000 or $1,000,000, we can help you achieve it. Generally, a buyer can purchase a business that generates income equivalent to their available down payment. For businesses qualifying for SBA financing, it is possible to earn 3-5 times the amount of the down payment. Typically, the SBA requires buyers to be able to earn an income equal to their previous year's earnings after debt service. For example, if you earned $200,000 last year, the SBA recognizes that you would not be satisfied with purchasing a business that generates significantly less income. 

 Our inventory of businesses for sale is continually evolving, with some being sold and new ones entering the market. If you do not find an opportunity that interests you in our current inventory, we can leverage our extensive client base to assist you in finding one. We offer services as buyer agents and can be hired to locate the specific business you desire. 

The typical process for buying a business you have found and are interested in, work like this:

• A Non-Disclosure Agreement (NDA) is signed to protect the seller. Most sellers don't want their employees, customers or employees to know they are for sale.

• A "Business Information Report" is provided for your review. This report includes an overview of the business, potential avenues for growth, areas of weakness, and typically, financial reports for the past three years. It should be noted that most small business owners prepare their taxes to minimize tax liabilities rather than to impress. Ultimately, the Seller will be required to substantiate their cash flow numbers to the buyer.

• When appropriate, buyers are encouraged to visit the business as a regular customer without questioning employees about the business. If there is interest in the business at this stage, we proceed to the next step.
  
• Our broker will arrange a meeting with you and the seller, typically outside of business hours. During this meeting, you will have the opportunity to learn about how the seller started or acquired the business, as well as gain insights into its operations, employees, suppliers, and other relevant aspects. You will also be able to ask questions.

• · If, after meeting with the Seller, you decide to proceed with purchasing the business, we will prepare a written "Offer to Purchase" form for your approval. All offers we prepare include contingencies to protect you during the buying process. For example, "This offer is contingent on the Buyer's review and approval of the business financials." Your Broker will then present your offer to the Seller.

• · If the Seller agrees to the offer, the buyer then begins their Due Diligence period.

• · We advise that, prior to engaging attorneys, accountants, or other professionals, the buyer should conduct a preliminary review of the business' bank statements with the seller. This review is time-efficient and allows the buyer to verify the accuracy of the seller's reported cashflow. If the cashflow appears accurate, the buyer can proceed with professional assistance. If discrepancies are found, the buyer may either withdraw from the transaction or seek to renegotiate the purchase price. It should be noted that tax returns are often prepared with the intention of minimizing tax liabilities, and many business owners may not have complete proficiency in accounting software. Therefore, the business records may not be entirely accurate. However, the bank statements provide a reliable source of information.

• If the bank statements are satisfactory and adequately verify the business’ cash flow, the buyer begins a thorough review of the business.

• Upon successful completion of due diligence, if the buyer decides to proceed with the purchase, they should begin obtaining necessary business licenses, insurance, credit card processing, and other related items. Capital Business Brokers will supply a comprehensive list of tasks that need to be completed.

• After the closing, the Buyer and Seller will commence a transition period during which the Seller will assist and train the Buyer in the business's operations. The duration of the transition/training period can range from two weeks to up to one year.

• Many of businesses we market are priced based on a multiple of the Seller's earnings. For instance, an Auto Body Repair Shop owner might report an annual cash flow of $200,000, leading us to price the business at $500,000. Capital Business Brokers does not independently verify the financial information provided by Sellers. We accept the information presented by the Seller at face value. It is the responsibility of the Buyer to conduct due diligence and verify any information provided by the Seller.An initial inquiry is made on a business currently marketed for sale