The Buying Process

If you are considering making an investment in an existing business, or buying a franchise, there are several important considerations you need to make. 

First of all, know your financial position to give yourself the flexibility you will need to get a business cash flowing to keep from piling debt on the business.  Another reason is to be able to negotiate with a seller if they are willing to use seller financing to close their sale.  The seller is going to present their books during the due-diligence process, so as a prospective buyer having your assets documented gives the seller a means to make a decision on the terms of the seller financing.

If you are investing in a business and having it run by a third party do due diligence on that party as well as the business your are considering.  Make sure any claims are documented in the financials.  Check references out carefully.  If you will be running the business look for businesses that you can document a level of expertise.  Taking on a business because it sounds fun or you think you would like it, places you at a disadvantage when it comes time for a seller to make a decision on you and the level of financing you may qualify for.  If you have cash and decide to pay the price you can buy about any business!

Check with the Small Business Administration about their financing options and counseling through their business support services.

Expect to spend time with the seller’s intermediary before having access to the seller.  The intermediary is responsible to make sure only qualified buyers are obtaining information on the clients business.

For your protection it is always best to have your own CPA or attorney involved all the way through the buying process to make sure all of your interests are being covered.  A business broker may act on behalf of the seller and a buyer.  But because of potential conflicts of interest it is advisable for you have someone you trust looking out for you.

Looking for a business on Kauai?    Email Bob Courtney, bob@vrhi.com.