In my experience, most business sellers care about three things: value of the sale, continuity of their life’s work, and protecting their employees. Buyers consider these, along with if they are purchasing an entity with an appropriate return based on anticipated risk. It’s hard to know if buying a business is for you. To help you decide if you’d be a qualified buyer, here are some questions Merger and Acquisition (M&A) professionals ask.
How much equity do you have to invest? If you’re buying a company, per Small Business Administration (SBA) requirements, you will be expected to contribute 10% of the purchase price in cash.
Does the buyer have previous, relevant management experience? Go where you know! Bankers and brokers are looking for alignment between your background and the business you are purchasing.
Have you bought a company previously? M&A professionals are prepared to help, but their preference is for individuals that have purchased companies historically.
In addition to a validation process, there will be some costs associated with buying a company. These due diligence costs can appear punitive; however, they are designed to uncover risks that may be outside of your expertise. Below are the costs in addition to an estimate for your general planning:
Quality of Earnings Report: $25,000
Legal Expenses: $10,000
Equipment Appraisal: $7,500
Real Estate Appraisal: $3,750
Other Collateral Due Diligence: $8,000
Totaling around: $55,000
Keep in mind, the above list does not include other common costs such as loan origination fees, SBA guarantee costs, or others related to obtaining a business acquisition loan. The business buying process is much more nuanced than can be outlined here; however, most banks have experts that can help you start the process.
Phone: (260) 994-0450
Email: aarons@csbemail.com
