Resale businesses can be a great way to find a business already generating revenue, and ideally profits.
You basically get to buy an existing business with sales, employees, and systems in place. There are pros and cons to this ….it’s not all sunshine and rainbows.
Why do people Sell?
Well think about why you’ve ever sold a house, a car- or anything that at one point you valued- or still do. Life events trigger change, as do peoples goals. Sometimes people relocate, or they have health issues, they are retiring, or just get sick of doing the same thing.
Other reasons could be they are losing money, they aren’t good at being an entrepreneur, or they don’t want to or can’t handle the stress of running a business.
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When looking at Re-sales follow these steps:
SEARCH
Search and filter based on criteria that is important to you ( industry, cash flow, price, etc.)
INQUIRY
Place an inquiry on the website to learn more info
NDA
You’ll receive an NDA (Non Disclosure Agreement/ Confidentiality Agreement). In order to get more information- you will need to complete this
P&L
Next is to get the last 3 years of Profit and Loss statements, along with a the informational packet from the Business broker on the re-sale. (Keep in mind the business won’t always be listed by a broker, and the seller could be representing themselves.)
No matter what you need to see FULL P&L Statements in order to really have a baseline understanding of the financials of the business
OFFER
Assuming the P&L’s make sense, you would make an offer on the business. (This is where you negotiate specific terms)
ESCROW
Find an escrow company that has done business sale (asset sale) transactions. You will engage their services, and they will conduct a special search for debts or liens in the business name. These are called UCC liens. They will also receive the deposit for the purchase, and help to be the secure dis-interested party. If for some reason you opted to use a contingency and back out of the deal, the escrow company is the one handling the money and deposit – not the seller. (Typically buyer and seller split escrow fees.) * While in escrow you are working through one of the funding options to fund the business. My recommendation is to ALWAYS use an escrow company. You would never buy or sell a house without an escrow company, don’t buy or sell a business without one
DUE DILIGENCE
Once you are in escrow you will typically have a 10-30 day period to review bank statements, tax returns, start getting approved for the lease transfer ( if there is one), etc. This is your due diligence period. Ideally you have negotiated this contingency period so that if you find ANYTHING during this period that you don’t like, you are able to back out of the deal and get your full deposit back (Minus any escrow fee’s you may be responsible for)
CLOSING
After due diligence is all completed, the final step is to finalize escrow!
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