Business Brokerage for Buyers
We have three types of buyers —
- Buyers who are buying a business we have listed.
- Buyers that hire us to advise them while buying a business listed by another firm.
- Buyers that hire us to conduct a customized search for them.
We realize that buying a business is a big decision, and most people do not have prior experience of buying a business. Even if you do not buy a business, conceivably you may invest a significant amount of time and some money.
Our advisors have much greater depth and understanding into the buyer’s experience than most business brokers because they were Commercial Loan Officers before they were business brokers. As lenders, they typically had more of the bank’s money in the transaction than the buyer or seller. This dynamic results in the Banker’s interests being aligned with the buyers. The decision to place the bank’s money at risk involves multiple bankers to agree. The depth and level of this experience should not be undervalued. They understand the risk, the nervousness, and the fear of the unknown that a buyer may experience. They also know a good transaction when they see it.
Process to Successfully Buying a Business
- Commitment — You make a commitment to buy a business with the knowledge and willingness to acknowledge and pay current market price with current market terms. Most of our listings are professional service businesses that tend to be in architecture & engineering firms, accounting and payroll companies and healthcare professions, which have a large percentage of intangible assets. As a result, bank’s generally finance these business acquisition loans using SBA financing. In many situations, the SBA and/or bank may opt to strengthen the loan with a lien on you home. A commitment to pledge you home, if necessary should be part of the commitment decision. If your partner is listed on the deed, this will also require their approval.
- Non-Disclosure and Confidentiality Agreement — You sign a non-disclosure and confidentiality agreement (NDA) promising not to disclosure any of the information learned with the exception of your professional advisors.
- Background information — You provide information about yourself to help Allen Business Advisors assess if you are a good fit. This includes but is not limited to your description of an ideal business, your income requirements, the skill set you offer (resume) and money that you have and are willing to commit to the transaction.
- Review and Selection — We review the businesses available that meet your criteria and you select a business that meets your criteria.
- Buyer’s Background Review — We provide the seller with your background information, which is the same information you provided us in step 3. Beyond being paid for their business, the owners want to ensure that the buyer has the ability to take care of their “baby”. (You should understand, that figuratively, this is the owner’s child. They want to sell to someone who they believe will take care of it and help it grow.) This has been their life’s work and they want the buyer to succeed. If they are not comfortable with your abilities, they will stop the process.
- Showing — You are provided information and have the opportunity to tour the facilities.
- Meeting — You, the seller and Allen Business Advisors meet. At this point, you have the opportunity to ask the seller all of your questions. This is also your opportunity to convince the seller that you have the ability and willingness to operate the business.
- Letter of Intent — You (with our assistance) write an offer to the seller of the business. This offer is contingent (non-binding) until the seller agrees and meets your conditions. At this point, to demonstrate a level of seriousness you also provide a deposit typically around 5% of the purchase price to be held in escrow by Allen Business Advisors. (If the due diligence is not successful, you will have the opportunity to cancel the offer and receive your deposit back.)
- Present Offer — Allen Business Advisors presents the offer to the Seller (or seller’s representative if you hire us as an advisor).
- Review Offer — We review the offer with the Seller explaining your terms and conditions.
- Acceptance — The Seller accepts your offer with the terms and conditions as presented or makes a counter-offer.
- Mutual Acceptance — You and the Seller agree to the price, terms and conditions. This becomes the foundation for the Purchase and Sales Agreement.
- Due Diligence (Audit) — This is your opportunity to examine the books, records, contracts, bank statements, invoices, payroll information, customer lists and other information. (We suggest your hire a CPA and attorney to assist you with this.)
- Contingency Fulfillment — The Seller meets the contingencies that you made.
- Lease — Typically one of the contingencies of an offer is that the buyer can negotiate an acceptable lease. This step is specifically mentioned because it may involve a third party that is outside the contingency agreement. With that said, we represent professional service businesses in architecture & engineering, healthcare and business services, which can be relocated easier than a lot of businesses.
- Purchase and Sales Agreement — The attorneys write a legally binding agreement. An additional deposit of is customary at this time.
- Loan — If a loan is needed from a bank, this is when the formal application is submitted. The business would have been pre-screened by banks during the Seller’s pre-sale phase if Allen Business Advisors is the listing broker.
- Employment Agreement — The current owner has the contacts, and the institutional knowledge about the business. In almost every case the buyer will expect the Seller to stay at least a year after the sale.
- Closing — The parties meet to sign the paperwork and you make the required payments.
- Training — Typically the seller stays on for a period of time to train the buyer, make a joint announcement to the employees, and introduces the new owner to customers, vendors, and others that have regular interaction with the business.