Buying a Business – Houston Law Firm
In case you are considering buying a business, you need to be fully aware of the process and how to go about it. It can be quite long and exhausting, but with the knowledge of the process, things can be straightforward and smooth for you. Houston’s RunRex.com highlights the steps involved in buying a business.
- Identify the industry you are interested in venturing into
The first step is to define the enterprise you want. You then have to conduct thorough research on that market and thoroughly evaluate the mid-to-long-term prospects in that particular industry. This is important in ensuring that your business does not become obsolete within just a few years to come. Pay keen attention to the legal concerns like changes in the regulations and the competition. Getting expert of opinion from market forums and opinion experts is very insightful.
- Find a target business to acquire
Equipped with the knowledge of the market, identify the target business. The choice of the target business should be done having in mind your budget, the size of the business, its location, and the annual turnover. You should also pay keen consideration to your gut feeling. Only consider business options that you are confident you can be successful running. The best businesses to consider are those that are not actively seeking a buyer.
- Research about the business
This is preliminary research about the business that you should conduct before bringing in the experts to do detailed research. This research is meant to help you get a feel of the business is currently being handled. You can visit the business personally to have a feel of their customer service and also get a chance to look at their financial performance.
- Get your team together
You will need to assemble some professionals to help you start the process. You will need the services of a certified public accountant to help you review the financials and the books of the company, an attorney to help you navigate through the legal aspects of the process, an insurance advisor and a business broker. Having a team of people who are experts in their specific fields can help smoothen the process.
- Due diligence
Before giving your offer for the purchase, you need to get your accountant and attorney to perform due diligence on the business. This is to allow you to get a full picture of the company that will help you make an informed decision. Your advisors and accountant come in at this stage to help you examine the business books and records. This process involves a keen look at the company’s financial records and tax returns dating as far back as 5 years.
- Sign a letter of intent
In such transaction, often the seller requires a letter of intent to be signed by the buyer. This non-binding agreement prohibits the buyer from disclosing information about the business to outsiders and also prevents them from entering into negotiations with other potential buyers while the negotiations last.
- The heads of agreement
The Heads of Agreement is another document in the agreement process that condenses all the key element of the sale. These elements include the periods of confidentiality, payment, and responsibilities. This document also acts as the timetable for the completing of the buying process. It specifies the time-scales and the deadlines for the tasks to be done. It also specifies the circumstances that call for the process to be canceled.
- The sale and purchase agreement
Once the sale and purchase agreement is sealed, that will mark the end of the acquisition process. Unlike the Heads of Agreement, the Sale and Purchase agreement is legally binding.
- Payment of the negotiated amount for the purchase of the business
You and the seller of the business have to agree on how the payment for the business acquisition is to be done. This will depend on the size of your purchase and the scale. If the purchase is large, the financing can be a bit complex. Small-scale buy-outs, on the other hand, are characterized by straightforward payment plans.
The source of financing can vary depending on your plans. It can be from personal sources like saving or sale of personal assets, or it can be from loans, investors, loan companies or from peer-to-peer lending platforms.
The seller can relinquish full control of the company and walk away, or they can take a percentage of the full value and obtain shares in the company.
- Completion of the business buying process
Once all the documents have been signed and the payments made, you can take control of the business.
This process can be slow, exhausting and characterized by a lot of paperwork. Having the best hands and delegation of duties will ensure that you navigate the process smoothly.