Buy a business and forget the job but be careful and mindful. You can get a great deal out there but take a look at some of the key steps you will need to consider to make a successful business acquisition.

1. Presented by
Legacy Venture Group Business Intermediaries

3.  A recent Conference Board survey, indicated
that just 49% of Americans today are
satisfied with their jobs -- vs. 58% in 1995…
 Only 20% are satisfied with their employer's
promotion and bonus policies

4.  Have personal control (avoid
layoffs, ceilings…)
 Be your own boss
 Your efforts and investment help you
 Excellent potential
 It can be exciting
 Satisfaction (workers less happy)
 Flexibility to meet your needs & desires

5.  Lack of knowledge and / or experience
 Under Capitalized (Remember Working Capital)
 Wrong Location
 Competition (Present & what is to come)
 Asset investment too high
 Rent too high
 Cash Flow Challenges
* from SBA.gov – a great site for entrepreneurs

6.  Create your own
business
 Buy a new
franchise
 Buy an existing
business (or
franchise)

7.  Advantages  Disadvantages
 You can create  May need to do a
just what you great deal of
want research
 You don’t pay for  System and
someone else’s location unproven
efforts  Tough to get
 Total control financing

8.  Advantages  Disadvantages
 It’s a “proven  No success
system” guarantee
 Quick to start up  Upfront costs and
 May have Royalties
financing  Limited control

9.  Chances of you “discovering
the next McDonald’s is very
unlikely

10.  But just because it’s a franchise does not mean
you will be successful
 Check out:
http://www.bluemaumau.org/6776/25_worst_f
ranchises_buy

11.  Advantages  Disadvantages
 Cash flow may  The initial
start immediately purchasing cost
 Existing  Unseen / hidden
customers problems
 Easier financing  Customers may
opportunities not stay …
(*if, if, if)

12. Time Period % Sold
1 to 3 months 9.7%
4 to 6 months 28.3%
7 to 9 months 38.0%
10 to 12 months 15.9%
13 to 18 months 7.6%
19+ months .7%
4 to 12 months to sell 82% of businesses
7 to 9 months to sell 38% of businesses

13.  Many hunt for months
 Some find what they seek in days
 But 90% of shoppers never buy
 Financing can take weeks or months

14. “Understanding the business that is
right for you”
begins and ends with You!

15.  Personal background
 Personal interests
 Risk tolerance
 Limitations
 Financial resources
 Credit report
 Risk Tollerance

16. If married, these questions apply to you and to
your spouse:
 How comfortable are you with debt?
 Do you have a strong belief in yourself?
 Do you believe it is a business you can
handle?
The answers relate to how much business
you can buy

17. If married, these issues apply to you and to
your spouse:
 Geographic
 Cultural
 Industry type/knowledge
 Education
 Lifestyle change
 People skills

18. Write out your life priorities and put
in writing what you are and are not
willing to sacrifice of a business
i.e. Time from family, investment
limits, character of the business…

19.  How near to home?  Don’t just get stuck
 How many hours? on an industry at
 Maximum first but open you
investment? mind to any
 Minimum return on business that meets
investment? your needs and
 Type of tasks? desires!

20.  Put together your financial summary
 Be aware of ways to finance your business
 Did you know you can use your IRA/401K for
your business without penalty and taxes?
Contact us for advisors who can help with this service.

21. You will want information
about the businesses you
investigate;
be prepared to share about
yourself to them.

22. 1. Understand your cash requirements
2. Make sure you have appropriate.
Working Capital set aside!!!
3. Remember there are other expenses
such as rent and utility deposits.
Request a Buyer Cash Requirement Form from our offices!

23.  Business broker/intermediary
 Attorney (as opposed to a general
practitioner)
 CPA
 Commercial lender

24. Evaluate the business – and yourself –
regarding:
 Absentee ownership
 Generation of personal income
 Management style
 Growth expectations
 Self-image
 Physical requirements
Continued…

25.  Family involvement
 People skills
 Travel requirements
 Training requirements
 Demand for extra hours
 Weekends
 Day or night work?

26.  Review preliminary written information
provided by the seller
 Personally interview the seller to:
▪ Verify preliminary written information
▪ Establish a rapport
▪ Review business facilities and location
▪ Observe business operations during normal work hours
(if permitted)
▪ Collect additional data to determine value of business

27.  Look for numbers from taxes
and Profit/Loss statements
 Be wary of “Owner to Prove”
Call to discuss more things to watch out for when buying a
business!

28. You will probably have to sign a
NonDisclosure Agreement (NDA)or
Confidentiality Agreement (CA) of these
to get more details on a business.
*Read carefully and do not get locked into a buyer
fee obligation!
Request a sample from our offices!

29. Make an initial determination of business worth
based on:
 Written information provided by seller
 Interviews with seller and/or seller’s broker
 Personal observations of the business
 Analysis of historical records of the business
 Additional independent and outside
investigations of the business

30.  You should see evidence of earnings but you
typically don’t get copies of taxes, leases,
contracts and private details until you get to
the Due Diligence Phase following an
accepted, written contract to purchase the
business
Include in your Contingencies the right to have
acceptable evidence of claimed earnings

31. Research values including what
ratios similar businesses have
sold for –
NOT what For Sales are priced at!
A good brokerage can proved two or more
resources on what similar businesses sold for!

32. Or Owner’s Benefit
What did the business
generate for
owner, assuming one (1) full
time working owner.

33. Profit on Income Taxes
+ Nonrecurring Expenses
- Nonrecurring Income
+ Non-operating Expenses
- Non-operating Income
+ Depreciation
+ Amortization
+ Interest Expense
+ One Owner’s Total Compensation
= SDE

34. Unless buying a discounted distressed business:
 Must cover debt service
 Should return 15-20% on down payment
investment
 Should provide a return on time (annual
salary)
 Should meet the lender’s debt ratio
requirements

35.  In some cases a “letter of intent” (LOI) might
be acceptable (See Letter of Intent)
 You should submit a formal written “offer to
purchase” (earnest money contract) with
contingencies to the seller or seller’s broker
(See Purchase Offer)

36. An offer to purchase specifies price, terms, and
payment:
 Cash due at closing
 Assumption of debt (if any)
 Bank and/or seller financing: term, etc.
 Non-compete agreement
 Consulting income or earn-outs
Continued…

37. The offer to purchase usually has contingencies
satisfied prior to closing:
 Due diligence and confidential information not
disclosed by the seller that the buyer still needs
to review
 Lease assignment or negotiation of new lease
 EPA compliance
 Licensing requirements
 Franchise approval
Continued…

38. Other issues that are addressed in the offer to
purchase Agreement:
 Buyer and seller warranties
 Training
 Allocation of purchase price
 Desired closing date
 Date by which seller must respond

39.  Legal and tax Issues
 Litigation
 IRS audits/state sales tax
 Accounting
 Accurate picture of financial position
 Accounting method used (cash vs. accrual)
 Inventory valuation
 State regulations
 Environmental

40.  Purchase/sales agreement
 Promissory note
 Security agreements
 Bill of sale
 UCC filings
 Board of directors resolution (authorization to sell)
 Real estate documentation (if appropriate)
 Lease agreements
 Other side agreements
 Closing statements (prepared by attorney and/or
title company)

41. Pre-acquisition steps:
 Create buyer’s corporate entity and/or
register fictitious name
 Federal ID number
 Corporate bank account(s)
 Obtain appropriate licenses
(occupational, state sales tax, local, etc.)
 Obtain insurance

42. NEVER CLOSE WITHOUT A CLOSING ATTORNEY
 Execute (sign) the pre-approved closing
documents
 Transfer proceeds of the sale to the seller
 Transfer ownership of the Business to the buyer

43.  Sellers will usually train
you for 2 weeks to 6
months
 Anything beyond 2 weeks
is generally part of a
consulting arrangement

44. SEARCH
QUALIFYING
BROKER DEAL MAKING CLOSING
PROCESS
DATABASE
Explain Buying Process Business Interest Buyer/Seller First Meeting Coordinate Due
Diligence
Financial/Credit worthiness Qualify Buyer for Tour Business Loan Request Package
A specific Business
Business Review 1-Page Business Probe Buyer’s continued Lender Introductions
Experience Summary Interest
Licensing Determine Buyer Interest Motivate Buyer to Act – Assist in Resolving All
Offer to Purchase Issues
Life style changes Nondisclosure Agreement Facilitate Negotiations Formal Contract
Geographic Review CBR LOI or offer to purchase Review Final Documents
Location /Data Package
Close!

45.  Hire professionals who deal with buying
and selling businesses on a full-time basis
 Do your homework
 Know what you are willing to pay
 Prepare yourself for the purchase
 Enjoy the process and …

48. Legacy Venture Group Business Intermediaries
Call for more information on subjects covered in this
business buying overview
Request listing updates or to get our e-newsletter.
Info@BuyBizUSA.com
813.571.7700