Starting a business requires finding new customers, developing sales and marketing strategies, hiring employees and establishing a cash flow. This needs to be accomplished without historical sales, or any established customers. That is why some people buy a business rather than start one of their own.
When one buys a business, the seller will familiarize the potential buyer with the existing business. The buyer will receive information on current trading history, products, customers, supplies and sales records. The seller provides balance sheets and a cash flow history. The seller has to protect himself / herself from the tire kickers so that word that the business is for sale does not leak out, which might cause the seller a problem with employees and or customers. A confidentiality agreement is signed by the potential buyer to cover this risk. This is important to the buyer if a purchase is made. Any problems caused in the purchasing process will follow through to the new owner.
Confidentiality is important in a sale, acquisition or merger. Customers, suppliers and employees need to be kept out of the selling process until the buyer and seller come in terms and a sale is made. When several buyers are involved, it may be to the seller’s advantage to let them not know that other buyers are interested to create competitions without letting them know who the other buyers are.
A Letter of Intent is usually non-binding and as such generally does not require an attorneys review and approval. However, when a sale gets to the point, of an Asset Purchase Ageement, a Lease etc. an attorney should review the and approve the documents for both the seller and the buyer.
A buyer should look for a business that has growing sales, fits their sales and marketing strategy and has the ability to grow substantially.
Selling or buying a business requires the professional assistance of a Broker specializing in the transfer of businesses.