| Businesses are bought and sold everyday. Each | | | | PROVIDED BY THE SELLER:Analyze all financial and |
| transaction is | | | | non-financial documentation provided |
| unique, yet there are fundamental elements to the | | | | as a response to your Letter of Intent. For subjects |
| purchase | | | | that are |
| process that are common. The purpose of this | | | | beyond your level of expertise, acquire appropriate |
| article is to | | | | professional assistance.9) IMPLEMENT A |
| highlight the sequential components of a typical | | | | STRUCTURED DUE DILIGENCE PROGRAM:Validate |
| business | | | | provided information, research appropriate target |
| purchase plan. Whether you are a first time business | | | | markets, gather data on key customers, employees, |
| buyer, or | | | | patents, |
| a veteran business acquisition specialist, it is | | | | legal encumbrances, leases, purchase contracts, |
| imperative to | | | | pending |
| understand the evolution and eventual structure of a | | | | legislation, key suppliers and technology trends.10) |
| business | | | | UTILIZE PROFESSIONAL, 3RD PARTY BUSINESS |
| purchase transaction.Purchasing a business is an | | | | VALUATION SERVICES:Contract with a certified |
| iterative process. There are logical | | | | business valuation consultant to |
| and cost effective steps that need to sequentially | | | | define a fair market value, and equitable purchase |
| followed to | | | | term |
| maximize eventual purchase success and minimize | | | | structure for the business you seek to buy.11) |
| cost. For the | | | | INVESTIGATE ALTERNATIVE FINANCING |
| business buyer the ultimate goal is to find and | | | | ALTERNATIVES:Based on a valid business value |
| purchase a | | | | determination, seek and define |
| viable business for a fair market price, acquired via | | | | as many ways you can to purchase a controlling |
| most | | | | interest of the |
| favorable purchase terms. Following these sequential | | | | business with as much of other people's money as is |
| steps will | | | | reasonable.12) PRESENT YOUR FINDINGS TO THE |
| get you there:1) DEVELOP YOUR PURCHASE | | | | SELLER AND NEGOTIATE A DEAL:After your due |
| CRITERIA:Define all relevant criteria to qualify a | | | | diligence is completed, document your key |
| business for purchase2) ESTABLISH YOUR "BUYING | | | | findings, organize your information and present your |
| TEAM":A variety of skill sets and expertise will be | | | | case to |
| needed to cost | | | | the business seller. Hire a credible 3rd party |
| effectively locate, evaluate, structure, valuate, fund | | | | negotiator or do |
| and | | | | it yourself.13) DOCUMENT THE AGREED UPON |
| negotiate an equitable purchase agreement3) | | | | PURCHASE TERMS AND CONDITIONS, SET |
| DOCUMENT YOUR PROFESSIONAL | | | | A DATE:Put everything agreed to in writing. Finalize |
| "CREDITABILITY":Providing a written summary of | | | | the purchase |
| your professional skills, | | | | agreement, have your legal counsel review it. Both |
| experiences and successes of your entire buying | | | | buyer and |
| team will | | | | seller sign a Letter of Intent, committing both to the |
| fortify your image with any business seller you | | | | agreed |
| approach4) FINALIZE AND DOCUMENT YOUR | | | | upon purchase terms and to set a date and time to |
| FINANCIAL RESOURCES:Every business seller will | | | | close the |
| want to quickly qualify your | | | | deal.14) SIGNATURE OF FINAL PURCHASE |
| financial wherewithal early on in the mutual evaluation | | | | DOCUMENTS:If the deal is an equitable one and both |
| process. Secure your finances and document your | | | | parties have conducted |
| capabilities.5) EDUCATE YOURSELF ON BUSINESS | | | | themselves in a constructive and honest manner, |
| PURCHASE TERMS AND CONDITIONS:Take the time | | | | this should be |
| prior to your first business pursuit to educate | | | | a "joyous" occasion for both parties and their |
| yourself on as many common business purchase | | | | representatives.Today's successful business buyer is |
| terms and | | | | a disciplined person using |
| conditions as possible. Understanding your purchase | | | | a definitive process to find, qualify, value and |
| deal | | | | negotiate for |
| structure alternatives will maximize your negotiation | | | | purchase viable business acquisitions. If a business |
| effectiveness.6) DEVELOP A COST EFFECTIVE | | | | buyer has |
| MEANS TO LOCATE VIABLE BUSINESSES | | | | a written purchase plan, any number of other |
| FOR SALE:Decide if you are only going after | | | | supportive people |
| businesses that are "for | | | | can effectively participate, understand their role and |
| sale" or those that can be bought. Establish a variety | | | | contribute to the buyer's overall business purchase |
| of means | | | | process and |
| to define these businesses.7) UTILIZE NON-BINDING | | | | objectives.If you understand the fundamental steps |
| LETTERS OF INTENT:If you find a viable business | | | | involved in a typical |
| you like, document your | | | | business purchase process you are well on your way |
| intentions, intended deal structure and what exact | | | | to being |
| information | | | | able to effectively write a plan you can use to meet |
| you need to start your purchase due diligence.8) | | | | your |
| EFFECTIVELY ANALYZE ALL DOCUMENTATION | | | | personal business acquisition goals. |