Buyer Transaction Process Stages

How to Buy a Business, 11 Steps in Buying a Business

Our 11 step business acquisition process is explained below. For more information see our FAQ page.

Also see Bill Grunau’s book, “Own Your Future, Straight Talk about How to Buy a Business and Build Your Future”

1. Initial Inquiry: 
   You most likely are inquiring from one of our internet ads for a business we represent. To get detailed information about the business you will need to complete our NDA (Non Disclosure Agreement) and Buyer Profile.One of the biggest concerns for business owners regarding the sale of their business is maintaining confidentiality about the prospective sale of their company. To ensure the name of the company and information about it remains confidential we require a signed Confidentiality Agreement and Buyer Profile prior to providing any detailed information about the company.The Buyer Profile provides us with a snapshot of your financial position, available cash for downpayment and purchase, background and experience and credit score.
2. Confidentiality Agreement & Buyer Profile: 
   One of the biggest concerns for business owners regarding the sale of their business is maintaining confidentiality about the prospective sale of their company. To ensure the name of the company and information about it remains confidential we require a signed Confidentiality Agreement and Buyer Profile prior to providing any detailed information about the company.The Buyer Profile provides us with a snapshot of your financial position, available cash for downpayment and purchase, background and experience and credit score.
3. Confidential Business Profile:
   Our Confidential Business Profile is comprehensive and includes an overview of the business, its products-services, last 3 years financial statements, equipment lists and other information about the business.
   
   
4. Conference Call with Business Broker:
   After you have reviewed the Business Profile we arrange a conference call to discuss the business and answer your questions. During our conference call we answer your questions about the business and also learn more about your background and qualifications.
   
   
5. Meetings with Seller:
   The Buyer – Seller meeting is your opportunity to learn more about the business and the owner, as well as the Seller’s opportunity to learn more about the you. Seller’s are very interested in the Buyer’s background and qualifications and this is an important aspect of the first meeting.In your first meeting with the Seller we highly recommend being well prepared and focus on learning about how the business operates, the owner’s role, key staff, company products-services, etc.There are generally multiple Buyer – Seller meetings before an offer is made. The first meeting usually has general questions, followed by a second meeting where we get into more details.General questions about the financial statements are appropriate in the first meeting, however, detailed questions about the financial statements are more appropriate for later meetings or in some cases Due Diligence after an offer has been accepted.
6. Prepare and Submit Offer:
   We meet with you to prepare the offer on the CABB Asset Purchase Agreement or Stock Purchase Agreement along with any addendums for additional terms and conditions. When the offer is complete and signed we collect an Earnest Money Deposit check made out to the Escrow company which is held uncashed until Escrow is opened.We present the offer to the Seller and review it in detail explaining the offer and your thinking and rationale behind the offer.
7. Counter Offer and Offer Accepted:
   Offers are seldom accepted as is, even if they are excellent. Obviously price is the most common negotiating point and frequently terms need to be refined or clarified. We facilitate the negotiations, prepare the Counter Offers and Amendments to reach a mutually acceptable offer. When the Offer and Counter Offers have been signed by all parties we have a Contingent Purchase Agreement and begin Due Diligence.
   
   
8. Buyer & Seller Due Diligence:
   This along with the offer and negotiations, Due Diligence is one of the most critical steps in buying a business. Due Diligence is a Contingency for both Buyer and Seller and a critical milestone.During Due Diligence the Buyer verifies the revenue, expenses, earnings and financial wherewithal of the business. You will have access to all of the company financial records, bank statements, tax returns, and other documentation.There is also Seller Due Diligence where the Seller reviews the the Buyer’s qualifications, financial position, and overall capabilities of the Buyer.At the conclusion of Due Diligence Buyer and Seller remove the Due Diligence Contingency and Escrow is opened. If either party is unsatisfied with their Due Diligence then there are three options 1) resolve the issues or questions that arose during Due Diligence, 2) return the Buyer’s Earnest Money Deposit as specified in the Purchase Agreement and terminate the agreement, or 3) renegotiate the Purchase Agreement based on the new findings or facts.
9. Escrow Opened:
   After Due Diligence is complete, and both Buyer and Seller have removed this contingency, Escrow is ready to be opened. Note that other contingencies such as bank financing and lease contingency will still be open.Escrow will draft the Escrow instructions, cash the Buyer Deposit Check and open Escrow once the instructions are signed by all parties.During Escrow the Escrow Officer will run lien searches, publish the notice to creditors, obtain releases from tax authorities including Franchise Tax Board, Board of Equalization, EDD, etc. The Escrow Officer will send information requests to Buyer and Seller during the Escrow and documents for signature.
10. SBA Financing, Lease, etc.:
    The SBA approval process takes a minimum of 45 days if Buyer and Seller promptly send all requested information to the bank. Frequently SBA loans can take 60 days from the time of submission. Consequently in some cases we start the SBA approval process before Escrow is opened. The SBA lender (bank) will require information from both Buyer and Seller in order to approve the loan. This will include 3 years of financial statements and tax returns from Buyer and Seller, personal financial statement and resume from Buyer, and other information.A new or assigned lease in the name of the buyer is required prior to the Close of Escrow. We recommend introducing the Buyer to the Landlord as early as possible after Escrow is opened to give the Landlord adequate time to review the Buyer’s application and prepare a new lease or assignment of lease. Note that if an SBA loan is involved the bank may require a 10 year lease including options. In some cases this can be waived if the location is not critical or unique to the business.Any required licenses will need to be obtained by the buyer before escrow can close.
11. Closing:
    The Close of Escrow and Change of Possession (COP) occurs when Escrow has completed the lien searches, notice to creditors, obtained releases from tax authorities including Franchise Tax Board, Board of Equalization, EDD, and when bank funding is ready (if third party financing is being used). The new or assigned Lease must be ready prior to close of escrow.
    
    
12. Training:
    Most purchase agreements include 30 days of training by the Seller included with the purchase price of the business. In some cases this may be longer, rarely it may be shorter as the Buyer needs sufficient time to learn the business. In instances where the business is complex such as construction contractors, manufacturing, technical businesses, etc a longer training period may be required. In these cases a consulting agreement is often negotiated where the Seller agrees to stay as a consultant for a specified period of time with mutually agreed compensation.