Dakin Business Group (DBG) sometimes acts as a buyer’s representative but does not actively find buyers for businesses listed by others.

Acknowledging up front that the typical buying process sometimes isn’t typical, the routine small businesses buying process looks like this:

  • The buyer contacts DBG about a listed business or one they would like to approach
  • Buyer presents their capability to purchase the business and signs a non-compete and do-no-harm agreement
  • Buyer receives the seller’s marketing package. If none is available, DBG compiles industry benchmarks and a request for specific company data.
  • Buyer asks questions, through DBG
  • Buyer talks with the seller and DBG and perhaps another broker, often virtually
  • Buyer can ask for additional information and the seller (or seller’s broker) can release or not (the seller needs to feel comfortable that someone is not a tire kicker and really is likely to purchase.)
  • Based on buyer preferences, DBG prepares an offer contingent upon due diligence, securing a lease with seller’s help, their non-compete, financing, etc. The offer comes with escrow funds of 3-5% of the purchase price. These funds are returned if the lease is not secured or if due diligence turns up something fishy. If seller financing is required, the offer comes with buyer’s net worth statement and copy of credit score (not credit report)
  • Seller counters, agrees, or does nothing
  • Assuming there is an agreement, the buyer escrows funds, secures financing, franchise agreements, conducts due diligence, etc. At the very end, just before close typically, buyer and seller talk with landlord.
  • Seller and buyer usually use a neutral attorney (with DBG guidance) to complete the closing documents and share the fee.
  • From accepted offer to close can be as few as 30 days, pending financing. (Note, SBA financing can be as long as 6 months.)
  • New owner begins operations
  • All live happily ever after

Here are some tips to help buyers prepare to take over at close. Some are coordinated with the seller. ‘Some’ is emphasized because each business has different requirements. Consider these and consider any additional may be required with your consultants and the seller.

  1. Often transferred by seller cancelling and buyer initiating new: Utilities, phone numbers, alarm systems
  2. Often transferred by seller: URLs, email addresses, websites, vendor relationships, customer arrangements
  3. Often required by the buyer’s initiation, no transfer: Business entity, employer and tax identification number from the state and federal governments, municipal business licenses, fire inspections, environmental/health department certifications, insurances, bank accounts, merchant services accounts, online payment systems (e.g., PayPal,)
  4. Don’t be short of cash that may be required to take care of business before the sales generate enough to cover routine business expenses.Know that in most transactions, there are some expenses paid by the seller after you have taken ownership. You will likely be required to write a check to the seller to reimburse. Examples include rent deposit, prepaid advertising, and alarm systems.

    Note: DBG provides services to assist with this. Just ask.

  5. Getting to Close and Professional Assistance:

Generally, DBG, the business intermediary, will write the offer as a full offer to purchase or purchase agreement (comprehensive agreements). sometimes this is done as a shorter letter of intent or term sheet and followed up with one of the comprehensive agreements.

When a buyer asks for details about the business, further records may be needed. As an intermediary, I can assist with this process by working between the parties, providing platforms for document sharing, and guidance for reasonableness.

The seller may also wish to review the credit worthiness of the buyer if seller financing has been requested.

During this review, a contingency of the agreement to buy/sell, other determinations may be necessary such as allocation of purchase price, lease agreements, financing, franchise relationships, and plans for transition post sale.

Clients often engage my professional assistance with lenders to secure proper documentation to support the lending decision.

  1. Finally, as we approach close on the sale, a neutral escrow agent and/or transaction attorney will ask the parties to sign off at closing, ensuring appropriate payment for all services provided for drafting closing documents, holding and distributing funds. (Note – from time to time there are other formats and professionals engaged in this process.)

Throughout, the parties should engage their own accountant and attorney for professional opinions and assistance.

Thinking of buying a business? Let’s talk.