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It’s great to have a new business, but building one from scratch can be challenging. This is why many people prefer to buy small existing businesses outright. There are several reasons why you may consider buying a small business, like acquiring an upcoming competitor or just investing. Whatever the reason, the process of buying a small business remains the same. Let’s explore the whole process and discuss the key steps for buying a small business.

Do Your Research

Buying a small business is not just finding the one on sale but finding one that’s worth investing in. First, choose an industry that you have some experience with and search for the types of businesses that fit your interests. Keep searching in as many places as possible before you start picking your best.

Value the Business

Understanding how much the business might cost you is crucial. You need to be keen not to overpay as many sellers overvalue their businesses. Take into account the amount of time and money you can invest in the business. Factors such as size, location, liabilities, market history, and business maturity will affect the commitment. Make sure to set a budget of the money you have available to invest and the capital you’d need from a lender or through seller financing.

Get Professional Help

Professional help is invaluable as you go through the negotiation, valuation, and purchase process. Work with a team of professionals such as lawyers and accountants to offer advice on business valuation, due diligence, and legal documentation before investing in a business. You can also access advice on buying a business through a business broker.

Negotiate a Purchase Price

If you’ve decided to proceed with the business acquisition, it’s time to negotiate the price. You can either make a verbal or written unbinding offer. The negotiation process will begin if the offer is close to what the seller is willing to receive. In most cases, you may go back and forth before you get to a tentative agreement. Be patient and involve experts if you don’t have the capability to handle the process.

Submit a Letter of Intent

A letter of intent outlines all the discussions you’ve had, including the purchase price, and shows your intention to buy the business. This is a non-binding agreement that prevents the buyer from discussing the details of the business with outsiders.

Issuing a letter of intent gives you exclusive rights to buy the business within 90 days. The seller has to act in good faith to sell the business to you within the time frame if you’re able to meet the terms of the LOI.

Obtain Financing

After issuing an LOI and entering due diligence, work on financing your business. Most businesses are acquired through a loan, so it’s important to find out whether or not seller financing is an option.

Close the Transaction

After entering due diligence and you’re comfortable with all the details of the business, then it’s time to close the transaction. You’ll need to submit a final signed purchase agreement and agree to all the terms of the transaction with the seller. You should get the professional help of a lawyer or a business broker to help you navigate this part of the process. After closing the sale, make sure you apply for any required business licenses to facilitate a smooth business transition.

Buy a Business with Murphy Business

If you wish to buy a business on the national or international market, Murphy Business will give you access to the kinds of opportunities you’re seeking. With years of experience in business ownership, acquisitions, and mergers, we make it easy to find the right business for your budget, goals, and preferences. Call (727) 725-7090 or (888) 561-3243 or fill out the contact form today to connect with your local office.