What are the steps of buying a business? Do you just exchange money and sign a few documents? How do you know if you should buy a particular business? How many questions do you get to ask about a business for buying as a buyer? If you are asking these questions, this article is for you.
First Things, First: Initial Discussions
The initial stage of buying a business is pretty informal. The buyer and seller will talk about the viability of the deal, gauge the interest of the other parties, and the seller may even provide financial information. During this phase, the seller may ask the buyer to sign a non-disclosure agreement (NDA) if the seller is sharing sensitive information with the buyer, especially if that information is related to finances. If the seller is represented by a business broker, then the broker may help the discussions and act as an intermediary between the buyer and seller. Valuation of the business also often happens during this stage. The seller will provide its EBIDTA
and the buyer will take this information to her accountant to see if the financial calculation adds up. Based on the numbers, the buyer and seller will agree on a tentative purchase price.
Next: The Letter of Intent (LOI)
Once the buyer and seller both see that the transaction is beneficial for both of them and they are serious, the buyer will present a ...