Ready business for sale

A step by step look at buying a business,

from choosing your field and fixing of value to due diligence and completing the purchase.

  • Choose a type of business activity
  • Target the business of for acquisition
  • Research
  • Start negotiations
  • Evaluate this business
  • The Heads of Agreement
  • Due diligence
  • Sales and purchase agreement
  • Payment
  • Consummation
The first step is specifying the type of enterprise you’re searching for.

Decide, which industry to move into. You will need to analyze the mid-to-long-term prospects of the business activity before moving forward.

Pay particular attention to legal affairs, changes in regulations and have a look at local rivalry within the industry.

Trade magazines and newsletters are a good start – they put up to expert opinion about the prospects of your chosen business.

With wide marketplace knowledge now at your service, the next step is to target a suitable, specific business. Look at your budget, think of a size, a location, an annual turnover and, most importantly, whether you feel you can achieve success. Now find business, that matches these expectations.
Think about businesses that are not actively seeking a buyer, as well as those advertised for sale. Every enterprise has its price and tabling an unsolicited offer may convince the owners that the time is right for selling.

In such a way, you will be able to beat competitors in negotiations.

Don’t promise a deal that you can’t accomplish, just to open negotiations. A professional broker can be instructed to start negotiations discreetly on your behalf and help draw up mutually agreeable terms.

Before you engage experts, you can make a small investigation of your own. Try yourself as a customer to experience the service first-hand and also work with the company to look through its finances.
But you will most likely need to sign a confidentiality agreement before you can get access to sensitive company information.
At this stage you will get more specified picture of both the target business and the industry within which it operates.

Because of a clearer understanding of its business activities, you can start negotiations directly to the current owners and work together to make a deal, which will meet the needs of both parties.

One of the first points of negotiation will be price, after a preliminary valuation. At this stage, you shouldn’t worry, because your initial offers have no legal force. Make a plan of working in order to pool all the efforts in the same direction.

The valuation stage of buying a business is perhaps the most important part of buying a business.

An approach you use will differ depending on the type of business, which you are going to buy. Any asset valuation includes value from property and real estate to machinery and equipment.
Moreover, while preparing your offer, you shouldn’t put out of account the importance of turnover, profitability and ongoing contracts.

You can also draw on the resources of professionals and they will often provide expertise within a certain field or industry that can help to make your offer.

The Heads of Agreement, though not a legally binding document, is nevertheless a significant and useful stage in the negotiations. At bottom the Heads of Agreement, is comprised of the key elements of a sale and combine it all into a single document.
Payments, responsibilities, periods of confidentiality will all be set down in the Heads of Agreement at the time of the negotiations, when each party is still free to withdraw from a bargain.
The most important thing is that the Heads of Agreement will act as a timetable towards completion: explaining to each party the time-scale and deadlines for every step of the deal, from financing to the release of payments.
By this stage in the buying process, you will be intimately familiar with all the aspects of the sale and you will have a detailed understanding of how the rest of the process should unfold.

Having already undertaken your own, informal due diligence in the early stages of the purchase, you can draw on the resources of professionals, who will suggest you a more careful analysis of the target business’ accounts, practices and day-to-day operations.

Although you don’t want to take risks by cutting costs at this significant stage, don’t forget to stay in budget and keep your outgoings to a sensible ratio of the overall purchase: you do not want to be spending tens of thousands on accountants and lawyers for a firm worth only a hundred thousand.

The completion of your sales and purchase agreement will be the closing stage of the acquisition process.

Whereas the Heads of Agreement has no legal force, your Sales and Purchase agreement will give both parties their legal obligations for the sale.

You will have a various set of options for paying for your new acquisition, depending on the size and scale of your purchase.

A larger merger of multinational interests may involve complex financing from multiple sources. For a smaller scale buy-out, the most common method is a straightforward payment on completion agreement.

Financing can come from private means, angel investors, banks, loans companies or peer-to-peer lending platforms.

Sometimes, the current owners may relinquish full control of their business at sale, but take only a percentage of the full value on completion, in return for ongoing shares in company profits.

After completion of final documents, signing of a contract and payment agreement you have completed your newest business acquisition.

Congratulations: the business is yours!

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