Ready to take on the small business acquisition process?
Your research, conversations with key industry players, and searches on business listing sites should help you find some high-potential businesses that work well with your investment goals. And you may be able to learn a lot about those businesses by visiting their websites, reading news stories and press releases, and pouring through online reviews. Still, it's often difficult to assess whether any option is a great investment—at least, not without pouring through a business's financials, records, and processes.
How can I access the information I need?
Most sellers are reluctant to share their records with just anyone. They’ll want some assurance that you, as a potential buyer, are truly interested in evaluating the business for purchase—and that you can be trusted with their most confidential information.
To navigate those concerns, you’ll need to connect with the owner or the seller’s broker and express your interest in the business. Here are three points you should plan to cover:
- Explain your knowledge of the business’s brand and its reputation in its market.
- Describe how your skills and background can serve the business and support its legacy.
- Express your desire to build upon the owner’s successes rather than impose drastic changes.
If the seller is interested in moving forward, he or she will ask you to sign a nondisclosure agreement (NDA). By signing this standard, lawyer-drafted document, you affirm two things. First, you understand the seller’s desire for confidentiality. And, second, you will respect it as you examine the business’s financials, records, and trade secrets.
Once you return the NDA, the seller or the seller’s broker will release the documents you need to conduct a cursory examination of the business. This part of the acquisition process is very important for two reasons. First, it’ll help you learn whether the business is a good candidate for acquisition. And, second, it’ll provide you with an opportunity to build rapport with the seller.
|Rapport is essential. When starting the acquisition process, it can be the determining factor for sellers who receive multiple similar offers. It can also help you to establish the relationship you’ll need later, when you own the business and need guidance on the specifics of its operation.|
What's the next step in the small business acquisition process?
Once you receive the seller’s information, you’ll begin a process known as preliminary due diligence. Check out this guide as you work through this step:
You might also like this article as you assess whether the asking price is fair and reasonable:
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