Buying a business is a complicated undertaking, so you must understand how it works. If you decide to hire industry experts or manage it yourself, there are several things you need to know and prepare for.
Whether you are looking to buy a small company, a large corporation, or a franchise, we explain the key steps you must take in this article. To simplify the process and ease your stress, read it all here.
Within the first year, 10% of startups fail, so why not skip that risky period and invest in a company that has already proven successful?
Once you have an idea of the type of company you’d like to buy, these are the 8 steps you should follow to ensure the process is successful.
At McDonald Real Estate, our brokers also help you to find a business that suits your needs. We’ll present a range of businesses for sale, having already evaluated them in our careful selection process. Then, we’ll send you information about them before it’s made available to the public so you have a head start.
Your lender will also require financial information from the business you want to buy, but this isn’t publicly available. To get a loan, you will need to complete the next two steps first.
If possible, buy the products, try the services, and talk to customers to get a taste of what the brand offers.
Your broker will help you to assess if the business is suitable for you. Every business is different and it is good to understand if the business will work for you.
Now that you’re ready to commit to the purchase, it’s worth hiring a lawyer and an accountant. Not only will they make the process easier for you, but they’ll also improve your credibility as a buyer. A lawyer will handle the transaction process, including the legal transfer of the company into your name. An accountant will handle your financing, ensuring that everything is prepared correctly.
To keep things simple, your broker will coordinate communication between you, your lawyer, your accountant, and the vendor.
Before making any offers, you need to determine the value of the business and if it is worth investing in. By taking the current market into account, your broker will complete an appraisal for you, assessing how much it is worth.
This is your chance to compare the valuation to the information memorandum you received from the seller. Consider assets, ongoing contracts, and expenses, as well as projected growth.
When you’re ready, your broker will prepare a Sale and Purchase Agreement for you. This will contain the offer you are making to the business owner, who will then decide whether or not to accept it. Your broker will coordinate the negotiations between you, and ensure any conditions are added to the agreement, including the finalised sale price.
Once the agreement has been finalised you will then undertake your due diligence and satisfy any conditions. Due diligence is the process whereby you explore the details of the business to ensure that everything is as it should be. For example, you would review the assets, customers, and suppliers.
The handover period will normally last for 10-30 working days but this does vary depending on the size and complexity of the business. If you think you’ll need more hands-on time with the seller, you need to raise this at the negotiation stage.
Download our ultimate guide to buying a business for all the information you need before you start your purchasing journey. If you still have questions or need tailored advice, reach out to our friendly team today.