Buying a Business in Florida
How to Find A Business
Utilizing the services of a business broker will greatly expedite the process and result in a professional result. Business brokers are experts in finding the right business for you that meets your acquisition criteria in a prompt and professional manner. The following criteria will help ensure that you are working with the right professional.
- Is the Broker / Agent you are dealing with a full time, experienced business broker?
- Are they a member of the Business Brokers of Florida (BBF), the Florida Business Brokers Association (FBBA) or the International Business Brokers Association (IBBA)? As a member of these organizations, brokers are obligated to adhere to practice standards and a code of ethics.
- Does the Broker / Agent have access to the majority of businesses for sale in Florida?
- What is their Financial, Business, Educational and Professional background?
When you meet with a Business Broker, be prepared to discuss your background, work experience and financial ability to purchase a business so that we can help you find a business that meets your needs.
You will need to prepare a personal resume and financial statement which will be required by brokers, sellers, lenders, landlords and others who will be a party to the business acquisition. The following are examples of the questions a Business Broker will be asking you.
- Why do you want to buy a business?
- What is your educational background?
- What is your work and/or business ownership experience?
- What will be your participation in the business be?
- What is the maximum amount you have and will invest as a down payment?
- What is your overall financial capacity?
- Will you require an SBA loan or a Visa?
- What business categories are of most interest to you? Distribution / Fast Food / Manufacturing / Retail / Service / Wholesale
- What is the minimum Net Income you require?
- What is the maximum price you are willing to pay?
- What geographic location or locations would you like?
Review of the Businesses For Sale
Based on your qualifications and acquisition criteria, you will be provided information on all businesses that are currently available in the geographic area you prefer. If no such business is currently available you will be if you wish put in a database so that when a business that meets your criteria is listed you will be notified, eliminating you having to do daily or weekly searches. A confidentiality agreement and information on your background and financial capacity will be required for the name, location and confidential company information.
Speaking With & Meeting the Business Owner and Touring the Facilities
After reviewing the business profiles, a Business Broker will answer questions you may have about the businesses or will obtain the answers from the seller or appropriate professionals. Once you select those businesses that meet your acquisition criteria, the Business Broker will schedule conference calls and appointments with the business owners so you can speak with the seller and see the business.
- It is common for the business owners to require all meetings with prospective buyers to be during non-operating hours to avoid premature disclosure to employees and customers. The Business Broker will attend these meetings to introduce you to the business owner and facilitate the showing. Employees are typically not aware of the sale until after the sale has closed and the Seller introduces the Buyer as the new owner of the business. Employees may be a little nervous at first but are as anxious to retain their employment as the new owner is to retain their services. The Buyer reassures the employees that their job is secure and that they are excited to have the opportunity to get to know them and work with them.
- When meeting with a business owner, you will be able to tour the facilities and ask questions regarding the operations of the business. It is best not to discuss the price and terms of sale with the business owner. The Business Broker should be able to explain the basis on which the business was valued and the terms of sale required by the owner.
- Please remember to keep all proprietary information you obtain about the business confidential. Only discuss this information with your professional advisors and spouse, and remind them that the information is confidential and not to be disclosed to other parties. In most cases, the employees, customers, suppliers, landlords and lenders are not aware that these businesses are for sale. Premature or unauthorized disclosure could have a negative impact on the business being sold and potentially have legal ramifications, so confidentiality is a must for all concerned parties.
Contract for Purchase and Due Diligence
At this point you have reviewed operating information and financial summaries of the businesses that meet your acquisition criteria, and you have met with the business owners and toured their business facilities. You should now be ready to select the business that you feel best meets your needs and begin the process of making an offer and entering a due diligence period.
Business acquisitions may be financed by: All Cash, An SBA Loan, A Commercial Loan, Home Equity Loan, A Private Party Loan of Venture Capital. In some cases, the seller may provide financing.
A cash transaction the Buyer has no debt after the acquisition. This is a good option. As long as you have left yourself enough working capital to run the business and start repaying yourself with the profits of the business, having no debt service or interest due to an outside source is a great advantage.
Seller financing is usually 10%, however some sellers may go as high as 40 or 50% generally not higher. The greater amount they take back the more secure they will want to be by holding personal collateral and the more involved they will be in the operation of the business after the sale.
SBA financing can usually be obtained with a 10 or 20% down payment. Should the SBA require 20% and the seller be willing to take back 10% the buyer would only have to come up with 10%. The SBA generally provides working capital to assist in the buyers start up period.
SBA Loans put a first position lien on all the assets and inventory of the business, current and replacements. They also look for additional personal collateral, a second on your house, or a lien on other personal assets. The buyer to qualify must have excellent credit and the business a proven record of cash flow.
Buyers To Do List
- Hire an Attorney to set up set up a corporation, prepare a Purchase Agreement and advise on legal matters
- Select a business trade name and register it
- Engage an Accountant to assist in due diligence, tax matters and financial allocation
- Open a commercial bank account for operating and payroll
- Determine if payroll will be: done in house or by a payroll service or will employees be leased
- Set up a credit card machine
- Apply for Department of Revenue Licenses and Registrations
- Determine business liability and content insurance needs
Links to Important Resources:
- St Lucie County Contractor Licensing
For More Help and Guidance Contact:
Richard Zarzecki, BBA Actg. MBA Fin, Former CPA
Business Planning Advisors, Inc.
277 Royal Poinciana Way, Suite 212
West Palm Beach, FL 33480