If you are starting a small business and interested in acquiring a small company, you will need to understand the research and purchase processes. There are many small business resources where you can find useful small business advice. They can help you learn how to find appropriate small businesses, understand the legal terms and carry out the purchase of the business.
Finding Businesses
There are several methods to finding a small business for sale:
Build Your Team
Buying a business is not a proposition that you should go at alone. Make sure that you have your banker, your lawyer and your accountant ready to help even if you use a business broker.
Take a Peek
During the initial stages of buying a business, you will find out why the seller wants to sell and what the business has to offer. Talk not only to the seller or sellers, but to other people in the industry.
In addition, look at the audited and management financials for at least the last three years. You will also want to see any contracts that the company has with vendors and customers. The key to this part of the buying process is to dig, dig, dig.
Calculate the Value of the Business
The seller has a price in mind. You should have a price in mind too. You can calculate the value of the business through the company's multiples of earnings, debt paying ability and capitalization of cash flow.
Negotiate and Letter of Intent
Now is the time to start negotiating and structuring the deal. After you come to an agreement on price and key points, you and the seller will sign a Letter of Intent. Your Letter of Intent will include the key issues that you have discussed. For the most part, a Letter of Intent is not binding.
Due Diligence
This step of buying a business will help you determine whether the business is going to work for you. You will need to investigate the company's:
Since your Letter of Intent was not based on complete information, the terms under which you buy the company may change.
Sales Agreement
When you both have come to an agreement, you will have to sign a sales agreement. Your sales agreement should include:
Remember to get everything in writing. Verbal agreements do not count. The sales agreement will include lots of legalese, so comb through it with your lawyer before you sign.
 | Buying a business can be the answer to your dreams of independence. Make sure that you put together a support team to help you make the right decision. Get all of the facts about the business before you sign a contract. |
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