We all want to start our own business and escape the rat-race.
But starting one from scratch is risky and hard.
The least-risky way is to buy an existing business.
Here are 7 dead-easy steps to buying your first business 🧵:
But starting one from scratch is risky and hard.
The least-risky way is to buy an existing business.
Here are 7 dead-easy steps to buying your first business 🧵:
1. Finding a business.
Here your objective isn’t just to find a business to buy.
It’s to find one worthy of buying.
Look for:
• Positive cashflow
• Long-term growth plan
• An Industry you have experience in
Ideally look for a business that you can come in and improve.
Here your objective isn’t just to find a business to buy.
It’s to find one worthy of buying.
Look for:
• Positive cashflow
• Long-term growth plan
• An Industry you have experience in
Ideally look for a business that you can come in and improve.
2. Evaluate the business.
Once you found one, it’s time to figure out how much it’s worth.
You will come across multiple sellers who overvalue their business.
Once you found one, it’s time to figure out how much it’s worth.
You will come across multiple sellers who overvalue their business.
It’s your job to figure out the true value.
I’d recommend hiring a professional to take care of this.
That way you know you’re getting a good deal.
I’d recommend hiring a professional to take care of this.
That way you know you’re getting a good deal.
3. Negotiate a price.
This is where you state a price, either verbal or written.
And if that price is close to the seller’s idea, they’ll start negotiations.
This is where you state a price, either verbal or written.
And if that price is close to the seller’s idea, they’ll start negotiations.
Figure out what you want
• Buy the assets
• Stock sale
A stock sale is where you buy the company along with any outstanding legal liability.
Fix on a price that both you and the seller agree with.
• Buy the assets
• Stock sale
A stock sale is where you buy the company along with any outstanding legal liability.
Fix on a price that both you and the seller agree with.
4. Letter of Intent (LOI).
This is a letter that outlines everything you’ve previously negotiated.
This includes:
This is a letter that outlines everything you’ve previously negotiated.
This includes:
• Purchase price
• Intent to buy the business
It shows the seller you’re ready to commit.
This gives you exclusive access to buy that business for a period of time.
• Intent to buy the business
It shows the seller you’re ready to commit.
This gives you exclusive access to buy that business for a period of time.
5. Complete research.
Once you sign the LOI you’ll get more information on the company.
Once you sign the LOI you’ll get more information on the company.
You can further look into the company info before closing.
Look at:
• 3 years of tax returns
• Organizational documents
• Current year balance sheets
• Revenue broken out by customer
Look at:
• 3 years of tax returns
• Organizational documents
• Current year balance sheets
• Revenue broken out by customer
6. Raise funds to purchase.
During due diligence you should also be working on financing.
People usually use a combination of cash, equity, and debt.
During due diligence you should also be working on financing.
People usually use a combination of cash, equity, and debt.
Your options are:
• SBA loans
• Traditional bank loans
• Rollover for Business Startups (ROBS)
You should also consider seller financing, where the seller helps you finance the purchase.
• SBA loans
• Traditional bank loans
• Rollover for Business Startups (ROBS)
You should also consider seller financing, where the seller helps you finance the purchase.
7. Close the purchase.
This is where you’ll draft a final purchase agreement and agree to every term of the deal.
I’d recommend you get a lawyer for this part
This is where you’ll draft a final purchase agreement and agree to every term of the deal.
I’d recommend you get a lawyer for this part
To ensure you’re getting what you negotiated for.
Your funds will be held by escrow
And will be released to the seller once all the documentation is complete.
Your funds will be held by escrow
And will be released to the seller once all the documentation is complete.
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And if you want more content like this, follow me @SamsonJagoras
Thanks for reading 🥂
And if you want more content like this, follow me @SamsonJagoras
Thanks for reading 🥂
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