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Buying a business is a major decision, one that will stay with you for a long time to come. It will affect you financially and change your lifestyle. Based on years of experience helping people through the process of buying a business, SunbeltNE has identified several commonly asked questions. The information below is designed to aid you in identifying a business you like. It will also help you understand the process of how to buy a business. If you have any questions about buying a business, please contact the SunbeltNE office. Our staff will be pleased to assist you.
 
Why should I buy an existing business?
An existing business typically has existing cash flow, established customer and vendor relationships, trained employees and market-proven products and services. Hence it is advantageous to buy an established business compared to starting a new one.

Most relevant surveys reveal similar responses and, interestingly, making money is not at the top of the list. Some of the typical answers, in order of importance, are:
>> To control my own future.
>> To work for myself.
>> To take advantage of my skills and abilities.
>> To make money.
Why should I buy an existing business? An existing business typically has existing cash flow, established customer and vendor relationships, trained employees and market-proven products and services. Hence it is advantageous to buy an established business compared to starting a new one.

Most relevant surveys reveal similar responses and, interestingly, making money is not at the top of the list. Some of the typical answers, in order of importance, are:
>> To control my own future.
>> To work for myself.
>> To take advantage of my skills and abilities.
>> To make money.
What should I know while buying a business?

SunbeltNE believes in helping you buy a business you like and will feel comfortable managing. You, like every other prospective buyer, have a vision of making a business a success by running it with your own managerial skills.

Consider an example: you find a business that you like, with a great location, but it doesn’t have the greatest track record due to poor management or some other factor. Purchased for the right price and on the right terms, this business could become more successful with proper management, making it a great way to achieve your vision of being in business for yourself. SunbeltNE will help you negotiate the right price and terms that will be beneficial for you.

As a prospective business buyer, your major concern will be: why is the business owner selling the business? Business owners sell for a variety of reasons: retirement, poor health, relocation or simply being ready to move on. If it is a good business for you, the reason for the sale doesn't matter.

Finally, be aware that most businesses sell for much less than their listed price. Therefore, if it's a business you like, don't be afraid to make what you consider to be a reasonable offer.

Remember, the SunbeltNE broker is a trained, experienced professional. Utilize your broker's talents and call your broker whenever you need assistance or have questions about buying a business.
Why should I utilize the services of a SunbeltNE business broker when buying a business?

SunbeltNE business brokers are experienced and professional and are dedicated to providing you with superior service throughout the entire buying process. SunbeltNE's in-house process makes the transition from prospective business buyer to new business owner smooth and less complicated. At any given time, we average 10,000 businesses for sale listings throughout our network. Our brokers can help you with buying a business that best matches your goals and financial needs, while also providing the following key benefits to you as a buyer:
>> SunbeltNE brokers save you time and money
>> SunbeltNE brokers keep the buying process moving
>> SunbeltNE protects your confidentiality when you buy a business
How can SunbeltNE assist me in finding and buying a business of my interest?

SunbeltNE provides you with access to thousands of business for sale opportunities and then helps you identify businesses that suit your monetary and lifestyle requirements and that are appropriate for your business skills and experience. SunbeltNE will also help you understand and navigate the complexities of buying a business, facilitate negotiations between you and the seller and oversee the due diligence and closing process.
What fees will I be charged?

For a targeted search, you can typically count on a minimum retainer fee and a percentage success fee at closing.
What information is required from me so that I can learn more about a particular business?

In order to access detailed information about a business listed for sale, many factors like the size of the business, the complexity and competitiveness of the industry, the disposition of the seller etc. need to be considered. Safeguarding the confidentiality of the seller is absolutely essential under any circumstances and it is a responsibility that SunbeltNE takes seriously. Imagine the potential erosion in value a business could experience if its key employees, vendors, customers or competitors discovered it was for sale. For this reason, each and every prospective buyer must provide the following items (at minimum) before receiving additional information on a business that interests them:

>> Confidential Business Buyer Profile
This document will help your SunbeltNE broker evaluate business opportunities that best suit your background, experience as well as financial and lifestyle goals.
>> Personal Financial Statement
In conjunction with the buyer profile above, your SunbeltNE broker will require this document to determine business opportunities that suit you personal financial circumstances. This information will also be necessary to structure purchase offers and obtain financing when you decide to buy a business.
>> Confidentiality and Non-Disclosure Agreement (NDA)
This agreement identifies your responsibilities and obligations as a prospective buyer concerning any confidential information disclosed about a business listed for sale by SunbeltNE.
>> Credit Check Authorization or Recently Obtained Credit Profile
Sellers frequently require an up-to-date credit profile as a pre-qualification to disclosing confidential information to a prospective buyer. Furthermore, it will be required as part of a purchase offer that involves any sort financing or lease agreement.
What are the requirements for qualifying for SBA loans?

The SBA has flexible qualifying standards for its loans as compared to other types of loans; however, lenders will generally ask for certain information before deciding to use an SBA loan program. Generally, lenders will need the following documentation to evaluate your loan request:
>> Business Profile
A document describing type of business, annual sales, number of employees, length of time in business and ownership.
>> Loan Request
A description of how loan funds will be used, which should include the purpose, amount and type of loan.
>> Collateral
Description of collateral offered to secure the loan, including equity in the business, borrowed funds and available cash.
>> Business Financial Statements
Complete financial statements for the past three years and current interim financial statements.
>> Personal Financial Statements
These consist of statements of owners, partners, officers and stockholders owning 20% or more of the business. The strength and accuracy of your financial statements will be the primary basis for the lending decision, so be sure that yours are carefully prepared and up-to-date. The most important documents in your financial statements are:
1 Balance sheets from the last three fiscal year-ends
2 Income statements revealing your business profits or losses for the last three years
3 Cash flow projections indicating how much cash you expect to generate to repay the loan
4 Accounts receivable and "payable aging" breaking your receivables and payables in to 30-, 60-, 90- and past 90-day old categories
5 Personal financial statements from you and your business partners listing all personal assets, liabilities and monthly payments, as well as your personal tax returns for the past three years
Source: Small Business Administration, www.sba.gov.
What are the steps of the due diligence process?

Your SunbeltNE business broker can walk you through the steps of the due diligence process. However, due diligence being an extensive and thorough process, we strongly recommend consulting your attorney and accountant for a complete explanation. A sample list of topics reviewed during the due diligence process is given below:
>> General Information
>> Taxes
>> Organizational Matters
>> Material Agreements and Documentation
>> Litigation
>> Sales and Marketing
>> Regulations and Permits
>> Insurance
>> Intellectual Property
>> Employee, Deferred Compensation and Benefits
>> Financial and Accounting Matters
>> Environmental Matters
>> Receivables
>> Permits and Licenses
>> Liabilities
>> Relations with Authorities
>> Budgets and Forecasts
>> Miscellaneous
Why is confidentiality so important to the seller?

Typically, confidentiality is very important to a seller. It can be damaging to a business if it is known that it is for sale. Customers may not be interested in buying from a business that is up for sale, competitors could use the information to their advantage, and employees generally experience anxiety and often leave.
How are the businesses priced?

Generally, at the outset, a prospective seller will ask the business broker what he or she thinks the business will sell for. The business broker usually explains that a review of the financial information will be necessary before a price or a range of prices can be suggested for the business.

Most sellers have some idea about what they feel their business should sell for - and this is certainly taken into consideration. However, the business broker is familiar with market considerations and, by reviewing the financial records of the business, can make a recommendation of what he or she feels is what the market will dictate. A range is normally set with a low and high price. The more cash demanded by the seller, the lower the selling price; the smaller the cash requirements of the seller, the higher the price.

Since most business sales are seller-financed, the down payment and terms of the sale are very important. In many cases, how the sale of the business is structured is more important than the actual selling price of the business. Too many buyers make the mistake of being overly-concerned about the full price when the terms of the sale can make the difference between success and failure.

An oft-quoted anecdote may better illustrate this point: If you could buy a business that would provide you with more net profit than you thought possible even after subtracting the debt service to the seller, and you could purchase this business with a very small down payment, would you really care what the full price of the business was?

In summary, sometimes the seller's business broker will review the financial records of the business and make a recommendation about the price. Other times, the seller will obtain a professional valuation of the business. Sometimes, the deal structure is more important than the financial status of a business in determining the actual selling price. As an example, the cash to be paid and the availability of seller financing are important determinants. All other things being equal, typically, a greater cash requirement and/or lack of seller financing will lead to a lower selling price.

What happens when I find a business I want to buy?

When you find a business, the business broker will be able to answer many of your questions immediately or will research them for you. Once you get your preliminary questions answered, the typical next step is for the broker to prepare an offer based on the price and terms you feel are appropriate. This offer will generally be subject to your approval of the actual books and records supporting the figures that have been supplied to you. The main purpose of the offer is to see if the seller is willing to accept the price and terms you offered.

There isn't much point in continuing if you and the seller can't get together on price and terms. The offer is then presented to the seller who can approve it, reject it, or counter it with his or her own offer. You, obviously, have the decision of accepting the counter proposal from the seller or rejecting it and going on to consider other businesses.

If you and the seller agree on the price and terms, the next step is for you to do your "due diligence." The burden is on you - the buyer - no one else. You may choose to bring in other outside advisors or to do it on your own - the choice is yours. Once you have checked and approved those areas of concern, the closing documents can be prepared, and your purchase of the business can be successfully closed. You will now join many others who, like you, have chosen to become self-employed!

Why should I go to a business broker?

A professional business broker can be helpful in many ways. They can provide you with a selection of different and, in many cases, unique businesses, including many that you would not be able to find on your own. Approximately 90 percent of those who buy businesses end up with something completely different from the business that they first inquired about. Business brokers can offer you a wide variety of businesses to look at and consider.

Business brokers are also an excellent source of information about small business and the business buying process. They are familiar with the market and can advise you about trends, pricing and what is happening locally. Your business broker will handle all of the details of the business sale and will do everything possible to guide you in the right direction, including, if necessary, consulting other professionals who may be able to assist you.

Your local professional business broker is the best person to talk to about your business needs and requirements.

Should I hire an attorney?

It may be advisable to have an attorney review the legal documents. It is important, however, that the attorney you hire is familiar with the business buying process and has the time available to handle the paperwork on a timely basis. If the attorney does not have experience in handling business sales, you may be paying for the attorney's education. Most business brokers have lists of attorneys who are familiar with the business buying process. An experienced attorney can be of real assistance in making sure that all of the details are handled properly. Business brokers are not qualified to give legal advice. Keep in mind the fact that many attorneys are not qualified to give business advice. Your attorney will be, and should be, looking after your interests; however, you need to remember that the seller's interests must also be considered. If the attorney goes too far in trying to protect your interests, the seller's attorney will instruct his or her client not to proceed. The transaction must be fair for all parties. The attorney works for you, and you must have a say in how everything is done.

If you know someone who has owned their own business for a period of time, he or she may also be a valuable resource in answering your questions about how small business really works.

You have to make the final decision that "leap of faith" between looking and actually being in business is a decision that only you can make for yourself.

What are the main reasons for the failure of a business after it's bought?

>> The price paid was significantly over market value.
>> The due diligence procedures were not adequate.
>> A previously dependent asset was unable to function/survive without support (i.e. sales to related parties or below market debt).
>> A change in business environment created unexpected problems.
How much cash do I need in order to purchase a business?

In most cases, a portion of the total consideration paid for a business is paid in some sort of deferred payment - whether in the form of a seller note or payments contingent on the performance of the business. Third party lenders are also available to make acquisition loans. Therefore, a cash investment of 1/3 to 1/2 of the purchase price may be sufficient to complete a transaction, depending upon the financial details of the transaction.
Where can I obtain financing to help me buy a business?

There are a variety of sources available for purchase financing. These range from a typical commercial lending source to asset-based lenders and seller financing. The availability of outside financing will depend upon the asset base of the business, its operating history, collateral availability and projected cash flow - the same issues considered in all business lending. Seller financing is also an option. In this case, the seller of the business takes back a promissory note for part of the value of the company. Seller financing may be a good indication of the seller's faith in the continuing operations of the business. The SBA is a helpful resource when trying to determine what type of financing is available.
 

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