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ST. LOUIS, MO

10805 Sunset Office Drive Suite 102 St. Louis, MO 63127 Phone: (314) 833-9207 Fax:
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The Buying Process

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It's a Brand New Ball Game:  
Unless you have bought or sold a business in the past, you will find that buying a business can be a confusing and even a trying experience for the unprepared.
 
Even if you have experience in the corporate world of mergers and acquisitions, you will still find yourself on unfamiliar ground when buying a small company. That is why it is important for you to take the time to read this explanation of the process. And if you are a veteran in business transfers, and you have bought and sold many small businesses in the St. Louis Missouri area, you will gain a valuable understanding of the VR process which will assist you in working with our brokerage team.

Getting Started - Questions and More Questions:  
The search for a business opportunity almost always starts with a telephone call or a visit to a website like the one we host at VR. Sometimes the prospective Buyer is a Corporation, Private Equity Group or a Private Investor who has a very definite idea of the type of business wanted. But, often the Buyer is a first-time buyer and is still in the exploratory phase of the search. Many times a Buyer's first question is, "What kinds of businesses do you have?"
 
Well, we have lots of businesses, so that is a tough question to answer without some idea of the buyer's resources, skills, and needs. Maybe we just listed Ford Motor Company and you, our prospective buyer, just happen to have several billion dollars and a background in automobile manufacturing. There is a match made in heaven! But it's a match we cannot uncover without questioning you and learning more about you.
So the first and most important step is telling us about you. 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 are not just being nosy, we are narrowing your search and saving you time and aggravation. Our "Contact Us" page offers a Comment fill-in field which is a great way to initially share what you are looking for and to help us to help you find the business of your dreams, whether in St. Louis or elsewhere. Use the Comment field to share some details about what you are looking for in a business opportunity and we can explore more details during our initial phone call together.
 
Defining the Search - Non-Confidential Summaries:  After we have talked through your ideas, needs, and requirements for a business opportunity, we can begin narrowing the search. At this point, we find and present non-confidential summaries of business opportunities for you to consider.
Since you are viewing our website, you can see the non-confidential summaries of our exclusive VR network-wide listings or by simply using the "Businesses For Sale" search queue located on the side of our page. You can also view our local listings, which are shown at the bottom of our Home page or Contact Us for our private listings.
 
VR non-confidential summaries show our profile number, a description of the business, a summary of financial performance, the reasons why we think it may be a good opportunity, and the asking price. We recommend at this point you focus on the business and not on its financial performance or price. It is far more important now to find a business type you would enjoy owning. As we refine the search for the type of business opportunity you want, we will then look at businesses within your investment price range and businesses with the types of financial performance which meet your investment criteria.
 
Focusing on a Few - Digging Deeper:  At this point in your search, you will 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 of business inquiry.
This new level of business inquiry is one of mutual trust and obligation between you, VR and the Seller(s) of the business(es) you are interested in. You will be exposed to the specifics about the businesses which you have been considering and your next step is to agree to keep this information confidential.
 
Before we send you confidential information, we require you to send us your buyer profile and we require you to sign a Non-Disclosure and Confidentiality Agreement (NDA or CA). When you return these documents to us, we will divulge to you the name and address of the business along some additional details to help you consider the opportunity. You can obtain a copy of these documents by going to our Forms & Resources page and then downloading, completing, and returning the Buyer's Packet documents to us, either by scanning and emailing, dropping off at our office, or mailing to us.  We can provide you a secure and encrypted file transfer link to safely exchange documents if you ask. But please note, when you sign the NDA/CA you are agreeing to keep all of the information you receive about the business as strictly confidential; and, you are agreeing not to contact the owner of the business except through us and only with our permission. We take any violation of this bond of trust very seriously, and we will not tolerate any breach of this trust and the Seller may exercise their legal and civil rights to claim damages against you for violating the NDA/CA.  But, we are going to be trustworthy and professional and we should not have to worry about that, right?  Anyways... on to the Business Profile!
 
The Business Profile - The Facts & More:  A big part of our job on behalf of the sellers and brokers we work with is to do the work of selling their business while affording the seller the time to run their business. This means we will work with you to answer your questions about the business before we introduce you to the seller.
 
The VR Business Listing Profile on the business you are interested in is written to give you the information you need to decide whether or not the business is right for you. A typical business profile contains a detailed description of the business, summary financial data, additional business facts like lease information, the number of employees and much more. We split the Business Profile into two parts.
 
The first part is the Business Profile Listing Information packet, or BLI, which we also call the "Go/No-Go" packet.  There is enough summary information and details provided in this packet to compare the business against your buying or investment criteria.  If the business meets your criteria and if you desire to move forward with further due diligence, then we "Go" forward by drafting and signing a Letter of Intent (LOI), which is conditional upon your satisfactory review of further due diligence, and then you receive the second half of the BLI, which we refer to as the Due Diligence packet
 
Keep in mind, your LOI is contingent upon your satisfactory review and due diligence. Although LOI's are non-binding, they should be considered seriously and treated as if it is a true agreement.
 
For the initial step of the due diligence phase, we typically meet at our VR office and we present all of the financial documents to you.  You are welcome to bring your laptop and to invite your business partners, CPA, attorney, or anyone you believe is needed to help you review the business financials.  The Seller or their Broker is usually not present at this meeting, but we arrange for their availability by phone. 
 
The due diligence meeting can last several hours and we go through every line entry and review every business detail to your satisfaction.  If the numbers meet your criteria and you are satisfied with continuing to move forward, then we discuss the initial terms of your offer, prepare a draft Offer to Purchase (again, contingent upon your satisfactory review and due diligence of the business), and look at scheduling a day and time to meet the Seller and to do a site tour of the business.
If you decide after seeing the BLI that this business is not a good fit for you, then you make a "No-Go" decision and we move on to the next business opportunity.
 
If you are moving forward, and you are satisfied with the draft Offer to Purchase, then we move into formal due diligence and you are given a few weeks to do more research, verify your finances or work on your loan, and to submit the official Offer to Purchase to the Seller. 
 
The Business Owner Face-to-Face:  After reading the VR Business Profile and reviewing the financial information on the business, you should be prepared to make an offer for 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 since you may be seeking installment terms from the business owner. Often, your buyer credentials and ability to purchase the business are presented at this time as well to provide reassurance to the Seller that you are ready, willing, and able to buy the business if it continues to meet and satisfy your requirements.
 
If you have already declared your satisfaction with your initial review and you have a draft Offer to Purchase, then we schedule a day and time convenient for everyone to meet and to take a site tour of the business.  This typically happens within your formal due diligence window and the general expectation at this point is that you are, for the most part, satisfied in what you are seeing, comfortable with the numbers you have reviewed, and still intend to buy the business, provided there are no misrepresentations or serious concerns which cannot be corrected or otherwise overcome.  Your offer is conditional, which means you can still back out if you are not satisfied. 
 
Making an Offer: After meeting the business owner and touring the business, the next step is making an offer for the business. Making an offer is not a 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 business' detailed internal financial records, this is the LOI stage. The buyer must understand that their offer is always contingent upon the seller proving his or her representations. Due diligence - a specified period of time during which the buyer investigates the business fully -- is costly and time-consuming, and it must be done only after an agreement on the initial price and terms is reached through the LOI.  If, after your due diligence, you have a need to amend the LOI as part of your draft or final Offer to Purchase, you can make those changes in the Offer to Purchase.
 
It is the seller's responsibility to prove everything to the buyer. In another way, your LOI agreement on price and terms will be "non-binding" until you have had the opportunity to see all financial records and we have removed all contingencies.
 
The Offer to Purchase - Terms, Contingencies & Conditions:  Your Offer to Purchase will consist of terms, price, down payment and other terms, such as Seller financing or key employee agreements.  The formal Offer to Purchase is presented either at the end of your due diligence window or at any time before then when you are ready to make the formal offer.
 
Contingencies:  Approval of books and records, equipment, inventory, assignment of leases or loans and any other items that the Buyer requests to be incorporated into the structure of the agreement will be identified, in writing, and completed in accordance with the requirements you both mutually agree upon within the Offer to Purchase.
 
Conditions: Non-compete clauses, consulting agreements, training agreements and other relevant parts of the structure of the agreement will be spelled out, in detail, and agreed upon and signed by both parties before the closing.
 
Your resume of business background and experience:  You should have your resume and biography readily available and included in your Buyer's Packet.  When you submit the LOI, we will include this information to share with the Seller.
 
Your Personal Financial Statement:  Your Personal Financial Statement, or PFS, is key document to help ensure two things- 1) that you are ready, willing, and able to purchase the size of business you are considering; and 2) to build trust with the Broker and assure the Seller that you are credible.  In no circumstance does the Seller see your PFS.  This document is kept confidentially by the Broker and only shared with the Lender or another party with your written consent.  For example, we help introduce you to SBA lenders, business attorneys, and business CPA's.  We also help you assemble and package your documents in anticipation of bank financing or attorney paperwork.  If your PFS is needed by the Lender as part of their application process, we can either share the version we have with your permission, or you can fill out their version on your own.  We use this information on the Broker's side to verify your credibility and to ensure we are showing you suitable business opportunities and not wasting everyone's time.  This is not intended to be crude or disrespectful, but the Seller is putting a lot of effort into selling their business and they are trusting the Broker to bring viable candidates and to maintain their confidentiality.  That is why you do not see open houses for businesses for sale, much like you see for real estate.  The key word is TRUST.  The Seller trusts us and we need to trust you.  The PFS is the key document which sets us up for having the trust needed to be able to move forward together.  If you have reasons for not wanting to share your PFS, then understand that our ability to help you may be limited, so it is best to discuss this with your Broker up front and ask about other ways you can demonstrate your ability to buy a business.
 
Your Earnest Money:  An earnest money check is typically in the amount of 10% of the offered price for small businesses, or at least an amount which shows you are serious about entering into the Offer to Purchase. This check photocopied and presented as an attachment to your LOI, but it is not deposited with the Escrow Agent until there is a signed Offer to Purchase.  The terms of your offer will include specific sections which cover your rights to reclaim your earnest money if you do not move forward with the Offer to Purchase. 
 
However, if you misrepresented yourself, or if you have done something to harm the Seller by violating the terms of the NDA/CA, then you may not be entitled to receive the earnest money.  We help guide you through this to ensure there is no confusion and we ensure that all parties have vetted their conditions through the appropriate attorneys.  In our experience, when a deal has fallen apart, and there was no fault or other harm to either party, the Buyer has always received their earnest money back if they decided to walk away.  Your situation will require specific attention and we will help you navigate through this sensitive subject.
 
Due Diligence:  You and your advisors - attorney, accountant, and others - will have a specified period of time to complete your due diligence and remove the contingencies. When due diligence is complete and the contingencies are removed, the Offer to Purchase is binding. Should the business fail to pass due diligence, you are free to rescind or amend your Offer To Purchase.
 
Financing:  Almost every deal requires some form of financing. At VR, we work with buyers to help obtain the 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. But whatever the financing requirements, Buyers can expect guidance and assistance from VR in this important area.  We know what paperwork the banks will need, we know how to fill out the SBA loan applications, and we provide you with additional support, such as developing your business plan and your plan to transition into business ownership.  We also provide the certified business valuations and appraisals you need for certain SBA loans and for your annual IRS reports.
 
Escrow & Closing:  Escrow typically takes about 3-4 weeks. After escrow receives signed instructions, the escrow officer will contact government tax agencies for clearance and publish your fictitious name filing, enabling you to open business and banking accounts. Also during this time, a Notice To Creditors will be published allowing anyone with a claim against the business to step forward.
 
You're in Business!
 
Congratulations!  Finally, the big day arrives and you open the doors of YOUR business for the first time. There is a no bigger thrill, no better feeling than knowing you are in control of your destiny!
 
When you work with VR, we guide you along the way and help make your transition into business ownership as stress-free and simple as possible. So, now is the time to go back to our "Businesses For Sale" section on our Home page and get started on your search for your part of the American dream!     
 
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  • (314) 833-9207
  • 10805 Sunset Office Drive Suite 102 St. Louis, MO 63127

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