You have a deal to buy a business. Congratulations! But before the company is yours, there’s still a lot to do.
You’ve found the business you want and agreed to buy it. It’s important that you start the rest of the process knowing that, at times, it will be frustrating and exhausting for both you and seller.
While there are variations, here are some general notes on the primary segments of the process:
This focuses on the financials of the business you’re buying and your personal financial situation. The lender wants to be sure the likely cash-flow of the business fits your overall financial situation.
Your lender will give you a list of items needed for a loan. There can be a lot of forms and documents for this. Before you start, understand that it can take a lot of time and effort.
Due diligence also takes time and effort. It involves a comprehensive appraisal of a business. You’ll identify assets and liabilities. You’ll evaluate its commercial potential. You and your advisors will review, confirm (and challenge when appropriate) every aspect of the business. This stage of the process is about managing your risk by knowing the facts. It’s an important step.
In addition to all of the items needed to get a deal to closing, you also need to plan for taking over the business.
- Have you formed your new entity or LLC?
- Do you have the sales tax #?
- Do you have the Fed ID #?
- Do you have all of the required licenses and inspections?
- Is needed insurance in place?
- Are merchant services accounts ready to go?
- Is payroll service set up and ready to go?
- Do you have a complete inventory?
- How will you introduce yourself to the staff?
Getting through everything can be a challenge. You’ll be dealing with parties (banks, landlords, inspectors, etc.) who move at their own pace. It can be frustrating, so it’s important to keep a positive attitude and stay on good terms with everyone. Just keep in mind that, at the end of the closing, you will own your own business. Then you can pop the champagne!