Buying a business - 5 key points
What do I need to do to prepare to purchase my first company?
Preparing yourself before the purchase of a company is as integral to your success as customers are when running it. As the saying goes “failing to plan is planning to fail”.
Taking these simple, but important steps will make your purchase experience much more enjoyable and will lead to an efficient, timely transaction.
1. Know what you DON’T want to do – the first step to finding the right company for you is to know what you DON’T want to do. Eliminating some industries will lead to a more efficient search effort. Start looking at websites like bizbuysell.com and bizquest.com for ideas on what is in the marketplace.
2. Understand your financial position – get a real grip on what it costs your household to live each month. How much cash can you part with as part of the down payment and purchase price. Do NOT include home equity or retirement funds in this figure – just the liquid cash.
3. Organize your finances – much like you will be performing due diligence on the company you are interested in, a perspective lender and owner (if there is owner financing) is going to be doing the same to you. Have your bank statements handy – investment account statement – along with at least the most recent 3 years of tax returns.
4. Have a team of advisors who you trust – a CPA, attorney and financial planner are invaluable advisors when purchasing a company and helping protect you with tax advice, legal and contract advice and financial planning for the future.
5. Contact local Brokers, like Stony Hill, and get on their list as registered or qualified buyers. This usually entails executing an NDA (non-disclosure document) and providing some basic financial information.
Stony Hill Business Brokers are experts at selling businesses in PA, NJ, DE and anywhere in the Northeastern United States. We are happy to offer any guidance to future and current entrepreneurs!
By Kevin Freeman, Partner