The Business Buyer’s Guide to a Successful Transaction in Charlotte, NC
If you want to become an entrepreneur, buying an existing business can help alleviate some of the challenges of starting a new business. Still, the process and path to the closing table can be pretty complex and even overwhelming for first-time buyers. There are many steps in the process, from narrowing your focus to vetting the opportunity (and the existing business owners). To help you understand what’s ahead, we have put together the basics in this business buyer’s guide to a successful transaction.
Buying an Existing Business Checklist
You’re likely already familiar with the benefits of buying an existing business. What you may not realize, however, is just how many opportunities are popping up every day. An estimated 10,000 Baby Boomers are retiring daily, many of whom are the owners of thriving small businesses. This means lots of possibilities for new owners to take over the helm. Of course, the purchase process is complex, and finding the right business for you can take some time. The following steps can help you avoid buyer’s remorse.
1. Determine What Type of Business You’re Looking for
When evaluating a business opportunity, knowing what suits your goals, budget, and lifestyle is critical. What do you love to do? What are you fascinated by? How could your background and experience fit into your role as a potential business owner? How involved do you want to be in the day-to-day business operations?
Additionally, now is the time to start taking stock of what kind of a down payment you can afford and what lenders you might use for financing. This will help you have a better picture of what you can afford when looking at asking prices.
2. Start Browsing Businesses for Sale
With that information in hand, it’s time to start looking at businesses for sale! If you’re sticking to the local market, you may be able to locate opportunities and some assistance through Mecklenburg County’s Office of Economic Development. Alternatively, finding local business brokers that know the Charlotte market can help you limit your search to professionally-represented companies that are more likely to have a fair and reasonable business valuation behind them.
3. Find Out Why the Business is for Sale
As you get further into the buying process, it’s important to understand why an existing owner is exiting the business. Perhaps they’re simply retiring or moving onto a new venture, but be on the lookout for any red flags. Cash flow or supply and inventory issues, poor location, or a general lack of customer interest are all hard to overcome. Make sure you’re up for the challenge if you decide to move forward with such an opportunity!
4. Focus Your Search
By now, you likely have a top contender among the opportunities you’ve been vetting. Before you move on to the next step in the sales process, take another moment and make sure the questions you asked in step one still align. Additionally, you should have a pretty good picture of the business at this point. Consider what you’d want to change, how much those changes cost, and what they mean for your involvement.
5. Gather Information and Paperwork
Once you’ve decided to pursue a business sale, you’ll likely need to sign some documents. Most sellers will ask you to sign an agreement that stops you from disclosing confidential information that comes up throughout the next steps of the process.
Then, it’s time to evaluate all the important paperwork for the business. You’ll look at everything from financial statements to legal documents, tax returns, and real estate agreements. For this reason, it’s best to work with your CPA and/or lawyer. The devil can be in the details, and this ensures that your best interest and understanding are taken into account.
6. Evaluate the Purchase Price
Finally, look at the asking price and determine whether or not it’s an accurate valuation of the business opportunity. If the owner utilized a business broker, you can rest assured that it’s likely fairly objective. However, you’ll want to dig a bit deeper if the owner personally came up with the price. Understand the differences in common methods and find out if they used an earnings, asset, or market approach.
7. Secure Financing
With a fair price agreed upon, it’s time to finalize your financing. There are several structures you can choose to utilize, but make sure you account for the working capital you’ll need to run the business as well.
8. Close the Deal
With the negotiations done, it’s finally time to put together all of the documents and agreements to finalize the purchase of a business. All of your hard work as a prospective buyer will culminate in your transaction purchase agreement. Once signed, you will officially be the new owner of the business!
The path to the closing table can take a long period of time and be filled with potential hiccups and challenges. Working with professionals throughout the process can help. If you’re hoping to buy a business in Charlotte, NC, consider contacting VR Business Brokers of Charlotte. Our intermediaries can help you find the right business for you.
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