Follow the VR Way!
Unless you’ve bought or sold a business in the past, you’ll find that buying a business can be a confusing and even tiring experience for the unprepared.
That’s why it’s important for you to take the time to read this explanation of the process. And if you’re a veteran in business transfers, and you’ve bought and sold small businesses, you’ll gain a valuable understanding of the VR process that 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 business listing website like the one we host at VR New Haven. Sometimes the prospective Buyer is a Corporation, a Private Equity Group or a Private Investor who has a very definite idea of the type of business wanted. But, more often the Buyer is a first-time business buyer and is still in the formative or exploratory phase of the search. If this describes you, then the first step is to find out more about what kind of business allows you to best meets your goals. 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 being nosy- we are narrowing your search and saving you time and aggravation. Our website Buyer registration offers a message block that is a great way to narrow our search and help us help you find the business of your dreams.
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 email non-confidential summaries (business teasers) of our exclusive opportunities to you or have you view them on our website using the “Businesses For Sale” button.
Focusing on a Few: Digging Deeper
At this point in your search to buy a business, 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(s) 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 Confidential Buyer Financial Statement and sign a Non-Disclosure and Confidentiality Agreement. When you return these documents to us and we confirm that you have the financial capacity to acquire the business, then we’ll give you access to the confidential business review.
The Confidential Business Review: 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 Confidential Business Review. This report is written to give you the information you need to decide if the business is right for you. A typical Business Review contains a detailed description of the business, summary financial data, additional business facts like lease information, the number of employees and much more. After thorough review 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 business review, you may be prepared to make an offer to buy the business. If not, 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.
Making an Offer
After meeting the business owner and touring the business, the next step is making an offer. This is not the final step. In fact, it should be viewed as the first of several steps, each of which brings 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 businesses detailed internal financial records. The Buyer must understand that their offer is always contingent upon the Seller proving their representations. Performing due diligence is costly and time-consuming, and it must be done only after an agreement on price and terms is reached. The offer should come in the form of a Letter of Intent (LOI) which is a non-binding agreement that allows the Buyer to negotiate exclusively with the Seller for a defined period that details the following conditions:
At the completion of due diligence, the offer either is amended or remains the same and a binding contract called a Purchase Agreement is drafted, negotiated and executed by the Buyer and Seller and becomes the binding contract for the transaction. With an executed Purchase Agreement that includes all other associated executed agreements such as a lease or seller’s note, Funds can be exchanged and the transaction closed.
- Terms – Price, down payment and agreed-to financing (interest rate, period, etc.).
Conditions – Post Sale non-compete clauses, consulting agreements, and training agreements.
- Due Diligence Requests– Itemize what items such as books and records, equipment, inventory, lease assignments, etc. the Buyer would like to review as a part of the due diligence process. You and your advisors – attorney, accountant, and others will have a specified period to complete your due diligence and remove the contingencies (typically 30 days).
You’re In Business! Congratulations! There is no bigger thrill, no better feeling than knowing that you are in control of your future. When you work with VR, we guide you along the way and help make your transition to business owner stress-free and simple.
A Note on Financing: Working with Sellers and the SBA. Almost every deal requires some form of financing. At VR we work with the Buyers to help obtain 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 (SBA). But whatever the financing requirements, Buyers can expect guidance and assistance from VR in this important area.