Looking to Buy a Business?
Whether in the pages of magazines or on countless posts in social media, we are regularly presented or should I say bombarded with articles advising sellers the process of selling a business and what they will be required to do from the time the thought of selling comes to mind until the business sale is settled.
What if you are a buyer, especially a first-time buyer? Most would say that they do not have any idea of where to start or what will be required?
In most cases a potential buyer will make the decision to purchase a business, whether their first or not. In the majority of cases, they will search the internet and find a business or several businesses that appeal to them, online. They will then contact the broker, by phone, a text message or the most common, they will lodge an enquiry online. That’s the easy part, what happens next?
The information is critical for several reasons, two of the most important are:
Finance: It is extremely difficult to obtain finance to purchase a business. If the buyer doesn’t possess solid assets and doesn’t already have a very substantial portion of the purchase price, obtaining finance will be very unlikely. The buyer’s background, experience in the industry can also come into play.
Lease: The landlord is very unlikely to assign the existing lease or offer a new one to a buyer who doesn’t have proven experience in the industry. The landlord will also want to know if the buyer has the funds to cover the rent bond and the first month’s rent. Even if the buyer has the funds to purchase the business and cover the bond, if he doesn’t have the experience in the industry, the landlord has every right to decline the assignment of the existing lease or provide a new lease.
Once the business broker qualifies the potential buyer, they will provide an Information Memorandum prepared by the business broker or his agency. The Information Memorandum will generally provide all relevant information about the business, including the name, location and financials, such as Profit & Loss for the past few years.
