The Buying Process
Confidentiality & Brokerage Disclosure
If word that a business is for sale spreads through a community, that business will likely be damaged in several ways. Employees often start looking for another job for fear of the unknown. Customers might cancel contracts, or at least explore other options. Competitors may leverage “the selling” to steal work. Therefore, you must commit to keeping confidential the information you learn about any specific business. Additionally, The Colorado Real Estate Commission requires brokers to disclose their brokerage relationships as the first step in working with a potential buyer. So, before we can discuss the details of any business listed for sale, you must complete our Buyer Registration Process Here.
Sellers set minimum requirements for prospective buyers such as financial, experience, education, licensing, etc. The Colorado Business Exchange must establish that you meet those requirements prior to discussing a business. Some sellers go as far as requiring us to not reveal their name and other identifying information until they specifically authorize its release to a prospective buyer.
If we are going to help you buy a business, we need to know a little about you. What is your background? What are your strengths and weaknesses? What are your work habits? What types of ownership roles suit your personality? What types of businesses interest you and why? What are your personal income needs? What are your financial capabilities? Anything else? Help us help you find the right business.
If you meet the seller’s minimum qualifications and your profile suggests you have the capacity for success in a particular business, we’ll provide you with further details about a company and its operations. We’ll reveal both positive and negative attributes of the company, its current trends and future potential. We’ll help you understand what your role will be as owner of the business and answer questions you may have. We’ll discuss the concept of Fair Market Value and show how it relates to your target company. If the businesses seems right for you and you are willing to negotiate a Fair Market Value for the company, we’ll arrange a meeting with the seller.
This is where you will have the opportunity to talk with the seller directly. We may tour the facility (after hours). You may ask pointed and probing questions about the business and the owner. After this meeting, you should be able to decide if the business is right for you. Additionally, you should be prepared to answer the owner’s questions. They might inquire of your background, motivations, and intentions, even your credit history. An important purpose of the meeting is for you and the seller to develop the rapport needed to achieve a successful transition.
Upon deciding that the business is right for you, we will help you write a Letter of Intent to purchase (LOI). The LOI details the price, terms, and other conditions of your offer. Typically, this letter goes back and forth between buyer and seller as they negotiate an acceptable agreement. Colorado Business Exchange acts as a mediator to facilitate this process, and foster a mutual understanding between buyer and seller. With experience working on a multitude of business ownership transitions, we can spot potential problems and red flags – and offer solutions to potential deal killers. As transaction brokers, we do not advocate for either party, but assist each party in understanding the legitimate positions and concerns of the other. Of course, the ultimate goal is a mutually acceptable contract that leads to a smooth transfer of ownership and successful business transition.
Once the parties are in agreement on the terms of the LOI, it’s time for the parties to engage their respective attorneys who will negotiate the finer points of a comprehensive and legally binding purchase agreement. Colorado Business Exchange facilitates the interaction between the attorneys, accountants, buyer and seller making sure the final contract accurately reflects the understanding of the parties.
The process a buyer goes through to verify that the business is actually performing as represented by the seller and that it will continue to be successful after the transition is called due-diligence. This process typically lasts several weeks. During that time, the buyer may audit the business records such as bank statements, ledgers, employment and tax records, leases, equipment maintenance records, etc. This is also the time for the seller to confirm that the buyer has the wherewithal to not only purchase the business, but to successfully run it. Colorado Business Exchange works with both parties to facilitate the due-diligence process. If due-diligence is successful, the sale moves forward. If not, it’s terminated.
Obtaining a conventional or SBA loan for the purchase of a business is a complex and onerous endeavor. Colorado Business Exchange maintains strong relationships with several local and national lenders to help navigate the process. We also help business owners and buyers determine if seller financing is a viable option. Whether the buyer obtains financing from the seller, a third party, or a combination of both, Colorado Business Exchange facilitates the flow of financial information and keeps closing on course.
If necessary, a physical inventory is conducted as agreed upon by buyer and seller. The closing documents are amended to reflect the exact inventory amount being transferred.
Colorado Business Exchange is responsible for ensuring a seamless closing. We coordinate with the parties’ attorneys to prepare all the necessary searches, releases, filings, reports, escrows, and prorations right up to the formal execution of all closing documents to complete the transaction. The buyer brings certified funds to be distributed according to the settlement statement and the title to the business changes hands. Closing marks the end of the transfer and the beginning of the agreed-upon transition. Congratulations are in order!