Considerations When Making an Offer on a Business
When you’re in the process of buying a business, it’s always going to be challenging to know what the seller is actually thinking. You’ll never quite know what compromises sellers might be willing to make. That factor can often make buyers feel uneasy when they are making an offer. In this article, we’ll take a look at some guidelines for buyers to keep in mind.
Find Out as Much as Possible
Make sure you are thorough in due diligence. You will, of course, want to see the financials. But there is a long list of files, agreements and documents you will want to review. Also, this will be the time to think about issues like zoning laws, environmental factors following regulations, contracts and leases. For example, you’ll want to ensure if there is a landlord, they are ok with the documents being transferred to a new owner. Our business brokers in Connecticut, Pennsylvania, New York, New Jersey, Maine, and Rhode Island will assist you.
You’ll also want to think about the state of the equipment, inventory and the environment of the business. Do things need repairs? What is inventory like? You will also want information on any intellectual property and customer lists that come with the business.
It’s good to get as much information you can without putting things in writing. After all, once you have put something on paper, it’s hard to retract it. Your business broker will help you through the due diligence process and ensure that get the needed information before making a formal offer. This will really help you get to know the business and get a feeling for what the seller is all about.
Be Open to Negotiation
There is usually a substantial amount of negotiation in buying and selling businesses. Even if you think that the cost is too high, or that the seller won’t agree to the owner financing you need, you may be surprised. The seller may be more accommodating than you think.
Take Advantage of the LOI
A LOI, or Letter of Intent, can be a great tool to use. It addresses issues and opens a dialogue without having both parties get lost in a sea of details. Included in the LOI can be the valuation, terms, financing, and anything you expect from the owners after the sale. Often included will also be an overview of the due diligence process and an estimated closing date.
Remember That You’re in the Driver’s Seat
Remember that when your money is on the line, you’re the one in the driver’s seat. If there are concessions or clauses that you feel need to be in the offer, go for it.
Also, if you and your business broker feel that the asking price is too high, you may want to explain your thinking for why the valuation should be different. Whether that seller had a business valuation in Hackensack or in another city on the east coast, Inbar Group can weigh in on the specifics involved
In the long run, you will want to avoid using up so much cash during the acquisition process that you’ll end up struggling to operate the business. You won’t want to end up stressed out while you’re in the early days of running your new business. After all, there might be things you want to change about the business, and you want to have the operating capital available to afford it.
Along similar lines, make sure the business itself aligns with your goals and resources. Think about how much time and energy will be required to get the business where you want it to be.
Reach out to one of our business brokers in Connecticut, Pennsylvania, New York, New Jersey, Maine, and Rhode Island, and we can help you find a business that meets your unique needs.