Buy a Business FAQs

Buy a Business in Mobile | FAQs

Buying a business is a major decision.

One that will affect you financially and change your lifestyle. Based on years of experience helping people buy businesses, Sunbelt Business Brokers has identified several commonly asked questions. The information below is designed to aid you in identifying a business you like and understanding the business purchase process. If you have any questions about buying a business, please contact us.

There are several reasons to buy an existing business: Actual results rather than pro-forma. Immediate cash flow. Trained employees in place. Established suppliers and credit experience. Established customers and name recognition. Existing licenses and permits. Training by the seller. The possibility of owner financing.

Unlike the sale of real estate or new franchises, the sale of an ongoing business is very confidential for both the seller and the buyer. All inquires are held in strict confidence. You will be asked to sign a non-disclosure agreement before any detailed information about a specific business is given to you. Meetings are confidential and may be held after normal business hours. This protects the business you may purchase by preserving the customers, suppliers and employees for the seamless transfer of the business to you.

The main item to consider is, “Do You Like The Business?” Additional considerations are: location, down payment and the owner’s true discretionary income. What training will the seller provide? What support will my suppliers give me? Can I improve the business? What can I do that the seller is not doing? What is my competition?

The amount of down payment varies depending on the type of business, the amount of hard assets included, the seller’s situation and your liquidity. Buying a business is actually very down payment driven. Naturally the more money you have for down payment determines the size business you can purchase. Typically, the more cash down you can offer a seller the lower the total sale price of the business. Your Sunbelt Broker will discuss with you the level of cash investment you should be comfortable with. Your Sunbelt Broker will explain to you that you should not totally commit all of your available liquid assets because of the importance of operating cash after you take over the business. Knowing your comfort level of cash investment is the most important information that your Broker needs to know to match you with the right business.

First, you will save time and money. The seller pays for your Sunbelt Broker’s services and the Broker knows what businesses are available. The Broker will learn what businesses are in your price range. The Broker knows the seller’s needs and what your requirements are. Therefore, your Sunbelt Broker can structure a transaction that is good for all parties involved. Your Sunbelt Broker is a professional and has experience in overcoming every imaginable obstacle. Your Sunbelt Broker will show you how to make an offer to purchase that protects you. Your Broker can coordinate the process and handle the negotiations at “arms length”. This is important because after the closing you will still need the seller’s goodwill and assistance in learning the operations.

Several surveys to answer this question seem to revel the same findings. In the order of importance to the buyers here are the results:

  1. To do my own thing, control my own destiny
  2. Do not want to work for someone else
  3. Better use of my skills, ability and imagination
  4. For the money
  5. To build something I can pass on to children

It is interesting to note that making money came in fourth and not on top of the list.

First you will need enough money to make the investment of buying a business and to make the improvements you see as necessary. You will also need operating capitol and reserves to live on. Next you must be willing to work hard, keep long hours, stay motivated, and keep your enthusiasm high. Far too many business buyers think they can just sit back and let the business continue to run as before. Real business owners must be “doers.” You are going to be an entrepreneur and a risk taker. If you accept these conditions you should be successful and excited about the possibilities.

This is a common belief, but a belief that is not usually correct. The vast majority of businesses for sale are being sold for human reasons rather than financial ones. Human reasons include health problems, change in the owner’s family situation, divorce, desire to do something else, relocation, retirement, or just plain burnout. Generally speaking, a business does not survive for several years if it is losing money consistently. However, most business owners will take advantage of every opportunity to reduce the income taxes that the business must pay on profits. Therefore, it is necessary to determine the true owner’s benefit to fully understand the financial health of the business. The answer is yes, most business we offer for sale are earning a profit.

Sunbelt Business Brokers has a large selection of businesses for in all price ranges, with listings of under $50,000 and over $5,000,000. The buying of a business is down payment driven, with cash requirements as low as $10,000 to $20,000; there will be many opportunities available to you if you qualify.

There is no fee or charge to a buyer. Our compensation is in the form of a commission earned when we successfully bring a buyer and seller together at the actual closing of the transaction. Our interest is educating you about the buying process and in finding a business that works for you. The Sunbelt Business Brokers will work very hard in understanding your needs and interests, and then staying with you throughout the entire process.

Some of the advantages of buying a franchise are:

  • Known name means instant recognition of a proven product or service.
  • Ongoing support means you are in business for yourself, not by yourself.
  • Better than 85% of franchises are successful.
  • Operating systems are in place, systems that have been worked out for you.
  • Opportunity to add additional locations within the franchise system.
  • Training by the franchiser for you and your employees.
  • The availability of a financing program established by the franchiser.

Working with you Sunbelt Broker, make an offer at a price that you are comfortable with, allowing some room for negotiation. You assume the information give you so far are correct, but you will have time to fully verify to your satisfaction before any closing takes place. This is done by the addition of conditions and contingencies to the offer to purchase. Your Broker will suggest several to you that will protect your interests. This will allow you time for due diligence and the luxury of “stepping back” and looking at this purchase without the emotion of continued negotiations.

At Sunbelt Business Brokers, we are advocates of finding a business that you will like and you will feel comfortable owning and managing. You, like every other prospective buyer, have a vision of being your own boss and calling your own shots.

Let’s assume that you find a business that you like, its location is ideal. Because of poor management, the business may not show the greatest track record. Purchased for the right price and on the right terms, this business could become more successful with proper management, it is a great way to achieve your vision of being in business for yourself.

As a prospective business buyer, you will be concerned as to why the business owner is selling the business. Business owners sell for a variety of reasons: retirement, poor health, relocation or simply being ready to move on. If it is a good business for you, the reason for the sale is not that important.

Finally, be aware that most businesses typically sell for less than their listed asking price. If it’s a business you like, don’t be afraid to make what you consider to be a reasonable offer.

Remember, Sunbelt Business Brokers are trained, experienced professionals. Utilize your broker’s talents and call your broker whenever you need assistance or have questions about buying a business.

A Sunbelt Business Broker will provide you access to thousands of business-for-sale opportunities, then they help you identify businesses that suit your monetary and lifestyle requirements, ones that should be appropriate for your business skills and experience. Sunbelt will help you understand and navigate the complexities of the buying process, facilitating negotiations between you and the seller.

The information you will be required to provide in order to obtain detailed information on a business listed for sale will vary, it will depend on the size of the business, the complexity and competitiveness of the industry, the disposition of the seller and other factors. Under any circumstance, safeguarding the confidentiality of the seller is absolutely essential. It is a responsibility that Sunbelt Business Brokers takes seriously. For this reason, each and every prospective buyer must provide the following items (at a minimum) before receiving additional information on a business that interests them:

  • Personal Financial Statement:
    Your Sunbelt broker may require this document to determine business opportunities that suit your personal financial circumstances. This information will also be necessary to structure purchase offers and to seek financing when buying a business.
  • Confidentiality and Non-Disclosure Agreement:
    These documents identify your responsibilities and obligations as a prospective buyer concerning any confidential information disclosed about a business listed for sale by Sunbelt.

Your Sunbelt Business Broker is a representative of the seller, they are paid by the seller. There is little or no direct cost to the buyer to utilize a Sunbelt broker. Because of Sunbelt’s market presence and expertise, buyers often engage a Sunbelt broker to perform a targeted search for a business not currently listed for sale to find an owner willing to consider a purchase offer. Under this circumstance, the broker is a representative of the buyer and the buyer is responsible for paying the broker fee. For a targeted search, you can typically count on a minimum retainer and a commission as a percentage of the sales price at closing.

Even though the SBA-qualifying standards are more flexible than other types of loans, lenders will generally ask for certain information before deciding to use an SBA loan program. Generally, lenders will need the following documentation to evaluate your loan request:

Business Profile:
A document describing type of business, annual sales, number of employees, length of time in business and ownership. Sunbelt Business Brokers will help collect this information.

Loan Request:
A description of how loan funds will be used, which should include purpose, amount and type of loan.

Collateral:
Description of collateral offered to secure the loan, including equity in the business, borrowed funds and available cash.

Business Financial Statements:
Complete financial statements including income statements and  balance sheets for the past three years and current interim financial statements. SBA will also require cash flow projections indicating how much cash an owner operator can expect to generate to repay the loan, as well as accounts receivable and “payable aging” statements. Your Sunbelt Business Broker will request this information.

Personal Financial Statements:
Statements of owners, partners, officers and stockholders owning 20% or more of the business. The strength and accuracy of your financial statements will be the primary basis for the lending decision. Be sure that yours are carefully prepared and up-to-date.

Source: Small Business Administration, www.sba.gov.

Due diligence should be an extensive and thorough process. We strongly recommend consulting your attorney and accountant for a complete explanation.

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