Looking For A Business to Buy in Houston? Who Do You Call?
If you want to be successful in making a business acquisition, you want to work with a brokerage firm with a large inventory of businesses for sale and an experienced staff of professionals who are focused ONLY on selling businesses and have the training and experience to successfully close the deal.
While most first-time buyers may initially think it is a simple undertaking, they quickly find out that it is not. It is definitely not simple, and it is not similar to searching for a home. Except for the fact that there are Brokers to help you and market trends involved to assist in valuations, there is no comparison between buying a business and buying a home. So don’t make the mistake of using a Real Estate Broker to buy a business.
Stick with a Business Broker to buy or sell a business. They are specifically trained in structuring business sales and have an extensive network of professionals, such as attorneys, accountants, and SBA and other lending institutions, who are experienced in business transfer transactions.
It is important that you have performed a self assessment and are aware of the sequence of steps involved in the process of buying a business before beginning the search. Try to concentrate your efforts on businesses that you can realistically afford to purchase and fit your specific needs and goals.
Diving Into The Process – Taking Action
If you see something you like, take the next step in getting more information from the Broker. You will need to sign a non-disclosure form, also known as a confidentiality agreement. Respect this short but very legally binding document. It basically states that you will be receiving confidential information about a business for sale and you agree to keep it confidential. Confidentiality means not exposing the for-sale status of the business to any employees, vendors, customers or to the general public. This agreement also has a circumvention clause that states if you try to go around the Broker after you have this vital information, you and the Seller will owe the commission fee to the Brokerage company, including any legal fees incurred in taking action to collect said commission.
Doing the Homework – Information Gathering
Once you have signed the non-disclosure for a business of interest and asked for further information, you will receive a packet of vital information.
You will receive a profile which will give a minimum of the latest 12 months of revenues, expenses and cash flow information. Other provided information may be whether inventory is included in addition to its value, the value of furniture, fixtures and equipment (FFE), an extended business description, lease or property purchase information, and potential financing availability.
At this point the address and name of the company may be given to you, but is sometimes done after you have reviewed the information and request to see the business. Again, this avoids giving tire-kickers vital information and the location when they are really not serious Buyers.
Research – Q&A
Once you have the vital information and performed your analysis, it is time to ask questions. However, it is not the time to start negotiating.
If you are interested in a business in which you are not very knowledgeable, do some research and construct a list of pertinent questions to ask. For instance, you may want to know if their are specific licenses or certifications required or if there are employees already working at the business that perform certain technical duties in which you have no expertise.
There is nothing wrong with going into a fairly unfamiliar business, but asking the right questions with help from a Business Broker will become essential in this type of circumstance. Asking nothing at all, whether you know the industry or not, is also not a good idea. Brokers like to receive feedback from you so they can begin to narrow down the types of businesses that would fit your criteria and goals.
Taking a Tour – See the Business/Seller Meeting
Once you have performed your preliminary analysis, your questions have been answered satisfactorily, and things still look interesting, this is the time to request a viewing of the business and/or a meeting with the Seller.
A meeting with the Seller will not be made to negotiate price when dealing with a Broker. This is neither the time nor the place. Negotiation is done using the Broker as the intermediary on a one-to-one basis. The Seller specifically engages a Broker to perform this function, which serves as a buffer between the buyer and seller during preliminary Q&A gathering and negotiations. Most Brokers will remind you that the purpose of the initial visit to the business premises is to view the operations and to ask the Seller additional questions that may help you determine if you are still interested in further pursuing the possible purchase of the business.
Walk away with the additional information you learned after seeing the business and meeting the owner and decide if you can envision yourself wearing the owner’s shoes.
Crunching the Numbers – Evaluate the Business & Make an Offer
In order to make an initial offer, which is a non-binding offer at this point, you need to be able to take all of the financial and historical information you gathered and value the business. An accountant may come in handy at this point to help you in deciphering the financial data. If you do not have an accountant, a reputable business broker has a list of transaction-experienced accountants that you can contact. Or read about how businesses are priced.
When you attain a comfort level with the financial data, then you are prepared to make an offer that the Broker will present to the Seller. In all likelihood, you will review more than just a few businesses before you get to this point. But once an offer is made and is accepted by the seller, the due diligence phase begins with the hope that a closing date will be scheduled and a successful sale is consummated.