7 Steps to Purchase a Business

7 Steps to Purchase a Business

Posted on September 07, 2017
Many buyers have never been through the process to purchase a business before.  As a broker, there is a process that we like to follow to make sure confidentiality of both seller and buyer are protected and to make sure the process goes smoothly. communicate this process once a buyer reaches out to us, but here are the steps we use:

1.  Buyer signs Non-Disclosure Agreement and a Personal Financial Summary

  • Broker's agreement with seller includes pre-qualifying all buyers

  • Meeting with Broker to discuss Buyer's objectives and show business opportunities that fit Buyer's criteria and background

2.  Review Confidential Business Profile

  • Buyer puts together a comprehensive question list that came from reviewing the CBP

  • Broker gets compiled questions answered

3.  Buyer and Seller Meeting with Broker

  • Come prepared to ask questions to the Seller

  • Seek fact finding only, no negotiations regarding price or terms will be discussed

  • Buyer will gain all necessary information to write a Non-Binding Letter of Intent to begin due diligence

4.  Submit Non-Binding Letter of Intent (Offer) and provide refundable escrow deposit

  • Offer will make Seller comfortable enough to "fully disclose" business financials including tax returns, P&L Statements, private financial records of the business and anything else pertaining to sensitive information

  • Many contingencies in the offer to protect the Buyer.  If the Buyer finds anything wrong, the escrow funds are refunded without cost

5.  Due Diligence Begins

  • Seller begins full disclosure including balance sheets, asset lists and costs, contracts, and any other information pertinent to the buyer veification

  • Buyer reviews leases, contracts, and other assumable agreements

  • Buyer reviews in great detail all aspects of the business and its operations

6.  Preparation of Closing Documents

  • Buyer has confirmed that all contingencies on the offer have been met and due diligence has been satisfied

  • Closing documents will be drafted by appointed attorney

  • All final documents to be reviewed and finalized by both Buyer and Seller and their advisors

7.  Closing

  • Buyer, Seller, and Broker to meet and sign the final documents

  • Money is transferred and the transaction is completed

 

Troy Frank is the President of Indiana Equity Brokers located in Indianapolis, IN.  With over 20 years in the mergers and acquisitions industry, he brings a wealth of experience and  knowledge to each business sale transaction.  Troy is an award  winning broker and is consistently one of the top producing brokers in Indiana.