FAQs - Buyers

How do I get started looking for a business?
The first step is to make the decision to purchase a business and understand the commitment involved. When you’re comfortable there, you’re ready to create a plan . . . and follow through. If this is your initial acquisition, your ongoing education as you work through the process will be a key factor in your ultimate success.

How can I identify the right business opportunity?
The first step is selecting a sector where you are knowledgeable and experienced. Can you picture yourself owning this business and working there every day? If so, chances are you’ve found the right opportunity.

Can I buy a business in an industry where I have no prior experience?
Beware! Being a good cook does not necessarily mean you can operate a restaurant. If you’re outside your area of expertise, do your homework. Research the target industry as extensively as possible.

Am I financially prepared and qualified?
Having your financials in order is as crucial to you as it is to the seller. You’ll have much more success dealing with brokers, landlords and lenders if you have a financial plan. As part of that plan, list all your sources of funding. That will help you understand if you’re prepared for a purchase.

How do I determine the true worth of a business I’ve targeted?
Business brokers and valuation specialists employ many complicated formulas and methods to determine the value of a business. In the end, though, a business is worth whatever the buyer is willing to pay and the seller is willing to accept. Market demand can have a significant impact on value. Businesses in strong markets often enjoy higher multiples while those in shrinking markets generally sell for lower multiples.

What is “Goodwill?”
When a purchaser pays more for a business than the book value of the business assets, the difference is known as Goodwill. Simply put, Goodwill is the premium the seller is requiring — and the buyer is willing to pay — for an established business as compared to that same buyer’s starting a new business.

Do I need a lawyer or CPA?
As a buyer, you have the right to legal, financial, business consulting, and appraisal guidance throughout the process. Most buyers engage outside professionals as needed, with billing on an hourly or fixed-fee basis so that the overall cost is not overwhelming. However, the due diligence process sometimes reveals significant problems or legal issues. While these cases aren’t typical, they do require outside professional expertise.

Does a business sale have to go through escrow?
We strongly recommend it. Keep in mind that escrow benefits the buyer more than the seller. Escrow will include the searches necessary to ensure that the business is being purchased free and clear from any liens, judgments and encumbrances. Escrow also will include a “Notification of Bulk Sale,” which allows creditors to submit any outstanding claims through the escrow process.