Everything You Need to Know to Buy a Company

It’s no small decision to buy a company. If you’re an entrepreneur who’s looking for a new opportunity but don’t want to start a business from scratch, purchasing an established business is the way to go. 

While this approach allows you to skip some of the more time-consuming and costly parts of getting a successful business up and running, you’ll still have to navigate the process of finding a business to purchase and negotiating a deal that leaves both you and the owner satisfied.

As this process can be complicated, it’s important to learn what to expect ahead of time so that you’ll know what potential obstacles to watch out for. Read on for our step-by-step guide.

Start by learning more about yourself.

Before diving into the classified ads to see what’s available in your area, take some time to think about why you want to buy a company. Ask yourself questions like:

  • What experience, passion, and skills are you hoping to leverage in this new endeavor? 
  • What industries excite you, and why? 
  • What business types are you most comfortable with based on your professional history? 

Only once you’ve answered these questions should you move on to looking at businesses for sale.

Get to the bottom of why a business is for sale.

Once you’ve found a business that you would be interested in purchasing, it’s necessary to take a hard look at why it’s for sale. Of course, it’s completely normal for a business to go up for sale because its owner wants to retire or make a career change. However, it’s prudent to assume that there might be another reason for the owner’s departure and that this reason could also influence your ability to run the business successfully.

Whether the business plan is not conceptually sound, the location is out of the way for customers, or the brand is suffering from image issues, it’s possible that a change of ownership wouldn’t improve the trajectory of the business. On the other hand, the owner may be struggling with challenges that you’re well-suited to overcome due to your past experience and personal strengths.

That’s why it’s important to speak with the owner at length about any concerns you have. You can also reach out to current customers, employees, and neighboring businesses to get a fuller picture of what’s going on.

Do your due diligence.

The above research is just the beginning. Once you’ve decided you’re serious about buying a company, you’ll need to gather even more information of a legal and financial nature. In order to ensure this process is completed thoroughly and accurately, it’s best to partner with professionals, including an accountant, a business attorney, and a business broker, if you aren’t already working with one.

From licenses and permits to organizational paperwork, business financials, and leases, these professionals will help you review a range of documents to ensure you’re making a solid decision by moving forward with the purchase.

Prepare for price negotiations.

Tread lightly at this stage, as many deals start to unravel when buyers and sellers can’t come to an agreement about the value of a business. A business broker can be especially helpful with these negotiations, mediating when tensions run high and providing access to reliable business valuation services to facilitate an objective understanding of the business’s value.

In addition to agreeing upon a final purchase price, you and the seller must settle the details of the final sales agreement – including tangible and intangible assets, intellectual property, and customer lists – before you can finally call the business yours.

Overwhelmed? Get Expert Help to Buy a Company with Confidence

This is only a brief overview of the general steps you’ll need to take to buy a company. In fact, the process can be quite lengthy and complicated. If you’re a first-time buyer, it’s likely that you’re going to make some mistakes along the way. That is unless you have someone more experienced by your side.

A professional business broker can assist with the purchase process from start to finish, helping you figure out what type of business best suits your goals, assessing potential options, and negotiating on your behalf to get the best price possible. Rather than worrying about every detail, you can focus on the big picture and maintain confidence as you make important decisions about the future.

Learn how one of our local business brokers can help you buy a company today. Call Murphy Business at (888) 561-3243 for details.

 

Business Broker? Your Questions Answered

If you’re in the market to buy or sell a business, you may have come across the term “business broker” in your research. While business brokers offer valuable services that make it easier for businesses to change hands, their purpose isn’t always well-known to individuals who haven’t participated in this kind of transaction before.

Below, we have answers to some of the most commonly asked questions about business brokers.

What is a business broker, exactly?

The role of a business broker is to act as a mediator between buyers and sellers of businesses. Rather than trying to negotiate the details of a complicated agreement themselves, these two parties can rely on a broker to be their go-between.

The broker increases the likelihood of a productive discussion, leading to a deal both individuals can be satisfied with. This can be a huge time saver in what is often a lengthy process, and can also minimize the stress and uncertainty surrounding the weighty decisions involved in buying and selling a business.

Why do you need a broker?

In addition to the above, brokers offer valuable services for both buyers and sellers. When it comes to purchasing a business, a broker can advise entrepreneurs about finding the right purchase for their budget, personal strengths, and expectations.

Since brokers have so much experience in the local business market, they are well-equipped to recognize when a deal is not in the buyer’s favor, helping the buyer avoid making a decision they would later regret.

For sellers, brokers make it easier to connect with serious buyers and can weed out individuals who express interest but lack the resources or know-how to run a particular type of business. Brokers can also assist with paperwork and administrative tasks that could otherwise be overwhelming for sellers to complete on their own.

How much does a broker cost, and are their services really worth it?

Brokerage fees tend to run between 5 and 10 percent of the selling price of a business. In most cases, especially for first-time buyers, the services of a broker represent money well spent. It helps to think of the broker’s commission as a kind of insurance.

Sellers will gain peace of mind that their business is being properly valued during negotiations, while buyers will have access to objective advice that can help them make decisions with confidence.

It’s important to get a complete understanding of what services your broker will offer and what their fees include as you get started.

What qualities should I look for in a broker?

In order to get the most out of your relationship with a broker, it’s important that you select one who has their pulse on the business market in your local community. This in-depth knowledge will come in handy for connecting buyers with sellers and correctly assessing the value of a business.

In addition, you’ll want to find a broker who you can easily communicate with. Since their role is to negotiate on your behalf, it’s crucial that you feel completely understood when discussing your priorities and goals with them. Likewise, as business negotiations can get complicated, they need to be able to communicate legal and financial details in a way that makes sense to you.

Where can I find a professional broker?

There are several resources you can check to find a broker in your local area. You can start with the “Business Opportunities” section of local and regional papers to see who is facilitating the sales of businesses in your community.

It’s also worth taking the time to ask previous and current business owners about their experience with trustworthy brokers. They’ll be able to give you their honest opinion of how a broker benefitted them during the buying and selling process. If you don’t have any business owners on your contact list, try checking with the local chamber of commerce or asking your CPA or attorney for referrals to brokers in your community.

Are you in search of a reliable business broker to assist you with buying or selling a business? Contact Murphy Business today at (888) 561-3243 to connect with a broker in your area.