Buying a business: It's a difficult process!
We can connect you with businesses for sale in Southwest Florida and Naples. If you are looking to buy a business with VR Business Brokers this page will help you through the process.
Are you serious about buying?
Many buyers would like to buy a business. Only a small percentage will buy a business. Our role as a business broker is to quickly try and determine if you are serious about buying a business within the next 60 to 90 days. It is okay to search the listing inventory and look at businesses but we are trying to determine if you are serious about buying today. We are going to ask you to complete a Buyers Profile
, Non Disclosure
, Financial Statements
and a Resume. Most buyers do not want to complete this information - they want to look at the business financials right away. Serious buyers will complete this process and have most of it already prepared.
Understanding how much you want to earn and pay for a business?
Businesses are typically valued on cash flow. The businesses we have for sale in Naples, are primarily valued on the amount of cash that the business is producing for the existing owner. You can assume for every dollar that you wish to earn you can spend between two dollars and three dollars to purchase that cash flow. In some cases where there is land, inventory or large asset values the cost per dollar may even be higher. If you do not have to work in the business the price may even be higher (absentee run). Assuming that you wish to make $100,000 per year you can expect to pay $200,000 to $300,000 for a business producing this cash flow. If you are financing your purchase then you will have to pay the financing costs out of the $100,000 until the loan is repaid. Since you're on our web site already you can see non-confidential summaries of our exclusive listings.
What kind of business do you want to own?
This is a difficult decision. In most cases doing something you know and understand is important. In many cases we realize that this may be your first business that you will own or it may be in a different field than you previously worked in. Sometimes it is easier to rule out certain areas. Do you want to run a restaurant or retail business? These are large categories and may quickly rule out many of the businesses currently for sale.
Become a smart buyer.
This simply means ask some very simple questions of the business broker trying to sell you the business. The more knowledgeable you are the better the experience you will have purchasing a business.
- What multiple of owner benefit are you using to value the company?
- Are these records provable on tax returns and company financial statements?
- Are the revenue/earnings still trending appropriately year to date versus last year?
- Are there any additional add backs that you use to calculate the Owner Benefit?
The Business Profile: The Facts, & More
A large part of our job is to do the work of selling while affording our sellers the time to run their business and not have to deal with “tire kickers” and nosy competitors. We will work with you to answer many of your questions about the business before we introduce you to the seller. We answer questions in several ways.
An important element in this process is the Business Listing Information (BLI) sheet. The BLI's are written to give you the information you need to decide whether or not the business is right for you. A typical BLI contains a detailed description of the business, summary financial data, and additional business facts like lease information, number of employees and much more. After reviewing the Business Profile and discussing it with your VR representative, you will have a pretty good understanding of the business and its' operation.
The Business: Face to Face for the First Time
After reading the BLI and asking questions you are ready to tour any businesses that are still of interest. Touring benefits both you and the owner. You will learn about the business from the person who knows it best. You will also have an opportunity to sell yourself if the seller is offering financing. After touring the businesses you should be prepared to make an offer within a few days.
Making An Offer: Let the fun begin!
Making the offer is not a final step. In fact, it should be viewed as the first of several steps, each of which bring you and seller closer to completing the transaction.
Because these are privately held businesses, you will need to make an offer before seeing and discussing the seller's internal financial records. You need to understand that an offer is always contingent upon the seller proving his or her representations during due diligence. Due diligence can be costly and time-consuming. Thus, it is done only after an agreement on price and terms has been reached.
It is the seller's responsibility to prove everything to you, the buyer. Put another way, your contract to buy the business is not binding until you have completed your due diligence and signed that all contingencies have been removed.
Your Offer to Purchase will consist of the following terms: Price, down payment and agreed-to financing (interest rate, number of payments, etc.).
Contingencies: Approval of books and records, equipment, inventory, assignment of leases (or securing a new lease) or loans and any other items that you and the Seller incorporated into the structure of the purchase contract.
Conditions: Non-compete clauses, consulting agreements, training agreements and other conditions embedded in the agreement.
Deposit Check: Pay an "Earnest Money" deposit check, typically 10% of the offered price. Your check will be deposited in our non-interest bearing escrow account or with the Closing Attorney. The money will be returned to you in full if the contingencies cannot be cleared.
Due Diligence: You will have a specified period of time (typically 10 working days) to complete your due diligence (e.g., to investigate all aspects of the business) and to remove all contingencies. When due diligence has been completed and all contingencies have been removed, the contract becomes binding. Should the business fail to pass due diligence, you are free to rescind or amend your offer or have the full amount of the deposit returned.
Financing: Working with Sellers, Lending Institutions and the SBA
Almost every deal requires some form of financing. VR will help you to obtain financing. Often, this means offering a Note to the seller or a bank loan guaranteed by the Small Business Administration. Your resume, credit check, IRS tax returns and references will all be required by the seller and/or lending institutions.
Closing Attorney: Performs Many Duties
After the Closing Attorney receives signed instructions from you and the seller authorizing closing, he will perform a lien search on the business and begin preparing the closing documents for buyer and seller's review. The documents include the closing statement, purchase money note, security agreement, consulting and/or training agreement and non-compete agreement.
What Do I Do While Waiting to Close? You still have a lot of work to do!
Your “to do” list will include incorporating, posting a fictitious name for your business and securing a federal tax number. These steps will enable you to open business and banking accounts and to complete other important steps. VR will guide in this process.
Closing Day: 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 own destiny. You have achieved the American Dream . . . to own your own business.