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A Step-by-Step Approach to Buying a Business

PLYMOUTH, MI - JULY 17, 2016: Culinary outlets, shops, and businesses line the tree-shaded sidewalk along South Main Street in this quaint suburb of Detroit.

Culinary outlets, shops, and businesses
Tree-shaded sidewalk along South Main Street
Plymouth MI, a quaint suburb of Detroit
Michigan

 

 

 

 


  1. Schedule an appointment with First Choice Business Brokers. During the appointment, you will be asked a series of questions to help your business broker understand what type of existing businesses you are targeting.
  2. Know how much money you are working with. It is OK to receive money from a relative to help buy a business and financing is typical in business acquisitions. Be prepared to provide proof of funds to the broker since many Sellers won't disclose confidential details without knowing you are able to complete a transaction.
  3. Have an open mind. There are many different types of businesses for sale and your broker will likely introduce you to businesses for sale in industries you have not considered. 
  4. Be prepared to sign an NDA. A confidentiality agreement, commonly referred to as a a Non-Disclosure Agreement or NDA, protects the Seller against Buyers who may mistreat the Seller's confidential information. Business Brokers are required by Sellers to have this agreement signed before providing intimate details about the business for sale.
  5. Line up your questions for the Seller. Your First Choice Business Broker will arrange a meeting with the Seller for you to view the business (often before or after the business's hours of operation) and discuss the business in more detail with the Seller.
  6. Make a decision on the business. After your meeting with the Seller your broker will ask you if you would like to proceed to the next step. By this time you may have seen the financials and are prepared to make an offer. If all the books and records have not been made available, you may still place an offer on the business and request that those items be provided through the process known as "due diligence".
  7. Write an offer to purchase. Your First Choice Business Broker will provide the most comprehensive proprietary Purchase Agreement in the industry. Our agreements protect ALL parties, covering simple items like the assignment of lease to more complicated issues such as key employee negotiations. You will be asked to give an Earnest Money Deposit (EMD) check, typically in the amount of 10% or $10,000, whichever is greater. This check is not deposited with the third party closing entity until the offer is accepted by the Seller.
  8. Your First Choice Business Broker presents your offer. If the Seller accepts your offer, you will move into the due diligence phase where you will have a chance to thoroughly review the items you requested. If you do not approve of the information provided during the due diligence period, you have the right to withdraw from the transaction and receive your deposit back.
  9. Sign a release of contingencies. Once your contingencies have been met and you have approved the due diligence items, you will be asked to sign a release which will take you to the final step of closing the transaction and transferring the business. 
  10. Sign the closing documents. A third party entity (escrow/title company) will prepare the final transfer documents and obtain clearances for taxes etc. so you are receiving the business free and clear of all encumbrances (except those that you may be taking over through your agreement such as leased equipment.

Congratulations, you just bought a business!