Buying an existing business has many advantages over starting a business from scratch. First, you’ll not waste a lot of time laying the groundwork. Secondly, you’ll have an existing customer base. Thirdly, the reputation of the brand will help you generate more profits. Lastly, it’s easy to secure business finance with an existing business than with a startup. When looking for a business to buy, it is recommended you work with a reputable business brokerage firm to improve your chances of getting the desired results. After finding the right business, you will have to make an offer to the owner. If accepted, you can start the process of paying the purchase price and transferring legal ownership of the business. Knowing how to make an offer on a business is important if you want to get the desired results.
Step 1: Conduct Due Diligence
Retracting a written offer to buy a business can come with financial sanctions. If you discover invoices or debts that were not disclosed to you before, you cannot retract your offer. This is because it is expected that you conducted due diligence on the business before you made the offer. Therefore, you must take your time to carry out due diligence before you make an offer to buy the business. You must research the ownership structure, market share, products and services, types of customers, assets, liabilities, lawsuits, recurrent expenditures, profits, and market valuation. This will help you to make an informed decision.
Step 2: Make Sure You Have Sufficient Funds
It is hard to retract a written offer, so make sure you have sufficient funds to purchase the business before you make an offer to buy it. You may need to get financing, so be sure to submit your application in advance. If you want to pay the purchase price in a few installments, make sure you state the terms of the proposed payment plan in the offer. However, you should know that most business owners prefer a lump sum payment.
Step 3: Quote a Lower Price
Just because you know the market valuation of a business doesn’t mean that you must pay that price. When making an offer to buy a business, always start with a lower price. Consider quoting anything between 50% to 75% of the market valuation. This is because buying a business comes with its own set of risks. However, you should be ready to negotiate.
Step 4: Get Everything in Writing
You can use either a letter of intent or a definitive purchase agreement depending on the size of the business. Be sure to engage the services of an expert, such as a commercial lawyer, to draft an LOI or DPA. However, there are templates online, that you can use to prepare your offer letter. Before sending the offer, always remember that it’s legally binding.
Step 5: Make a Down Payment
Depending on the conditions of the sale, you may have to attach a check for the deposit just to show you’re serious. The seller will cash the check if your offer is acceptable to them.
About MergersCorp M&A International
Since finding the right business is challenging, you can task MergersCorp M&A International with the job. MergersCorp M&A International can also help you with due diligence, negotiations, and paperwork. This will make your work easier.
- Finnish Strategic Investors Acquire Minority Stake in Italian Football Club “Crema Calcio 1908” - January 10, 2025
- The Rising Trend of Foreign Investment in EU Football Clubs - January 8, 2025
- M&A Trends for 2025: Navigating the Future of Corporate Consolidation - January 1, 2025
