Frequently Asked Questions:
- Do I need a business broker?
- I have found a business I want to buy, what now?
- How can I be successful with my new business?
- What should I look for?
- How does a seller price his or her business?
- What makes people decide to go into business for themselves?
- Should I buy a business or start one from scratch?
Should I get an attorney?
Our clients often ask Interactive if they should get an attorney to assist in the buying process. It is a good idea to have an attorney review your documents. However, make sure that this attorney is familiar with the process of buying a business. You will also want to select someone who can accomplish the process in a timely manner.
While, of course, you will want your attorney to look out for your interests, keep in mind that throughout the process the seller’s interests must also be protected. A seller’s attorney could instruct him or her not to proceed if it seems that the seller’s interests aren’t being considered. Obviously, any transaction should be fair for both parties.
If you are looking for additional information outside of an attorney and business broker, consider talking to someone who has owned his or her business for a significant period of time. This person can give you invaluable insights into how small businesses really work.
Do I need a business broker?
How can Interactive help you buy a business? First of all, we can give you an array of businesses to choose from and in many cases you wouldn’t have found them on your own. It is important to note that 90% of the time, business buyers end up with something other than the business they first inquired about.
It should go without saying that we can also give you a lot of information about the buying process and small businesses in general. We are entrenched in the market and can give you invaluable information about trends, pricing and even local considerations. Throughout the sale, we handle the fine details. If it is necessary for other professionals to assist you in any way, we can give you recommendations.
I have found a business I want to buy, what now?
It is at this stage that Interactive can be quite invaluable. We will be there to answer any questions you might have or do the relevant research. Next, we will prepare an offer based on the price and terms you feel are appropriate. Typically, you will have final approval upon review of the actual books and records supporting the figures that have been provided. You will find out at this stage if the buyer will accept the price and terms you offered.
It is essential that you and the seller agree on price and terms. When the seller receives your offer, he or she can approve it, reject it, or counter it with his or her own offer. If you receive a counter proposal, you can accept or reject it.
Once a price and terms have been agreed up, “due diligence” is next. The burden is on you – the buyer – no one else. You have the opportunity to bring in outside advisors or do your own due diligence. If there are no areas of concern, you can allow the closing documents to be prepared and close on the purchase of your business. Welcome to the world of the self-employed!
How can I be successful with my new business?
With a new business, you’ll have to work hard and put in many hours. Of course, even aside from the capital necessary to buy the business, you’ll also need money to make improvements. Buying a business doesn’t mean you can sit at a desk from now on. You must also get out there and handle a variety of elements including upkeep, promotions, hiring and bookkeeping. All of these elements and more contribute to success.
What should I look for?
The bottom line is that you want to find a business you would feel comfortable operating. To succeed, it is important that you are proud to own your business. Of course, there are also financial considerations. You also want to find a business that fits your price range and you want to make sure you’ll make enough income to pay your bills.
Keep in mind that when you see a business you want to buy, it is beneficial if you have ideas of how to improve it and make it more profitable. As a new owner, odds are that you will be making improvements to strengthen and grow the business. In our opinion, unless you can take the business to a new level, it is probably not the right business for you. The ultimate success of the business is in your hands, and that is why we advise clients to find businesses they feel optimistic about owning.
How does a seller price his or her business?
Typically, a seller will come to Interactive for advice on what a business’ selling price should be. After carefully reviewing financial information, we suggest a range of prices. We take market considerations into account. While a seller may already have a figure in mind, we will recommend a price range. When more cash is required by the seller, the price will be lower. In contrast, when there are lower cash requirements, the price is generally higher.
In today’s market, many business sales have a seller-financed component. As a result, the down payment and terms are essential. In many cases, the structure of the sale is more important than the actual selling price. The fact of the matter is the terms of the sale can mean success and failure.
What makes people decide to go into business for themselves?
Researchers are often looking into this topic. However, it turns out that most surveys reveal similar answers. The following list details what buyers typically are seeking:
- I want to do my own thing and control my own destiny
- I no longer want to work for a boss
- I have skills and abilities I’d like to take advantage of
- I’m interested in making more money
Should I buy a business or start one from scratch?
One main reason that buyers often purchase businesses is due to the fact that they have track records. Most business failures take place in the start-up phase. When a business is preexisting it shows that there is a need for its products and/or services. Further, there will be viable financial records to prove that fact.
Another advantage to buyers is that sellers will often stay and train the new owner. When a buyer can find someone who will train them and also offer financing terms, it can be tremendously attractive.