The guidelines outlined here are meant to assist you, the Buyer, in the process of purchasing a business. This system has helped hundreds of entrepreneurs since the founding of ExploreBiz. It exists as a series of "signposts" to assist not only first time buyers but the experienced buyer as well, develop a method of finding the right business while protecting your investment and avoiding unforeseen problems. We hope to convey increased confidence to you and peace of mind by offering our services in your business acquisition search.

Searching for a business in newspaper ads and broker listings makes sense. In addition to these sources there are a variety of other "lead possibilities". Sometimes your accountant may know of a suitable match. If you know an attorney he or she sometimes comes across "opportunities" that might be worth exploring. Maybe someone you have worked with knows of a business for sale or one that might be.

At ExploreBiz the listings presented to potential buyers are, in fact, businesses that we believe will stand up to review as well as create an income or add to an existing business' bottom line. These businesses have been scrutinized and the necessary information a buyer will need to make a decision has been assembled. They are priced with a valuation basis that makes sense in our current market.

In addition we like to see at least three years track record behind the business. Important to is a healthy industry with staying power and growth potential ~ what we like to call a CORE INDUSTRY. A history of profitability is a plus but there are many reasons why a business may not be profitable under the current management: burnout, under-capitalization, general management philosophy. (Many owners adapt a business to their own needs and not to the financial capabilities of the business.) These are items that a new owner can restructure to make a business profitable so if the first two ingredients are there (three years track record plus a healthy industry) the business will be marketed with restructuring in mind.

Define the criteria for the business you are qualified to buy before searching. It continually amazes us when an unprepared "buyer" calls and tells us he or she "wants to buy a business and has $3,000 to invest." By the way, the business must produce an annual income of at least $200,000!

Many first time buyers have no idea of the amount of money they will be expected to have; what types of financing are available to them; what a "reasonable expectation level" is; how many hours they will be expected to work, especially in the early days; and the list goes on and on!

A reasonable "rule of thumb" for a buyer to keep in mind is that whatever level of income a buyer feels he or she must derive from the business in one year should be matched by the down payment. For instance, if a buyer requires a $35,000 income he should expect to invest at least that much in the form of a down payment for the business he purchases.

People often ask us about the pricing formula. There is no magic multiplier, no formula that works the same way each and every time a business is sold. On average, what we have seen in the years we have been doing this is that buyers buy at and sellers sell at the price that makes sense to both of them. In general, businesses seem to sell at a range somewhere between two to four times what a buyer can earn from the business in a year, with that buyer working in the business and his salary included in the earnings of the business. This does not include real estate if it is included in the sale and it many times will not include businesses with high values assigned to equipment, such as a machine shop. These types of businesses are capital intensive and usually require different pricing formulas. A business must be able to pay for itself after a reasonable down payment.

It must be pointed out a broker's fiduciary responsibility is almost always to the Seller. We are hired to obtain the highest price on the best terms available to a Seller. The philosophy at ExploreBiz though is that a deal does not happen unless all sides are satisfied. It will not work if it is not fair to all the parties. Success turns on acquiring the business for a fair price. If the business meets your criteria you are encouraged to obtain financial and /or legal counsel to substantiate the business' condition and value and to structure tax advantaged terms of purchase. We hope to act as a buffer between you and the Seller. We will ask your questions of the Seller, negotiate the deal fairly, keep both sides friendly and ultimately help you and the Seller reach terms amenable to both sides.

We feel it is presumptuous for a Buyer to have an opinion on the price and terms before he has received and examined all the facts including the business' financial statements. Never discuss price and terms in any event before this!

You are expected to be diligent and thorough in your search for a business. It is important for you to be prepared to work hard! We feel it is a full time job just searching for a business. Before you can succeed in a business you must succeed in finding one. You need all the expert help you can muster. We hope to be an integral part of that process and assist you in achieving a lifelong dream.

The following narrative has been designed to familiarize you with our process.

Call/Interview. We will invite you to visit our office for a meeting/interview. This usually takes 1-2 hours. At this first meeting we hope to get to know each other. We will ask you about your "wish list". (Keep in mind we believe that is just what it is.) Many would be buyers think there is a perfect business out there. They think the business must fulfill 10 out of 10 requirements. We think this is faulty thinking doomed to failure. We believe if a buyer can be satisfied with up to 75% to 80% of his original wish list he is doing well! The purpose of the Interview is to help our customers better understand themselves and their options and develop a plan that will help them realize their immediate and long-term goals. Hopefully this Interview will prove to be an interesting and informative learning experience that will enable you to better analyze and identify real opportunities and avoid those that are not.

Buyer/Investor Profile. We will ask you to complete a "Buyer/Investor Profile". This document will help you determine what your needs are and in what direction your desire for change should take you. From the results of this Buyer/Investor Profile we will plan a strategy for achieving your goals.

ExploreBiz maintains the largest, most current database of business opportunities available in Southern California through it’s association with Sunbelt Business Brokers Network and the Franchise Network Group (FranNet). The opportunities we have to offer can be found through no other source. ExploreBiz provides the most confidential approach to screening appropriate business opportunities. By utilizing this process you will be satisfied you have explored all your options and have selected the best possible business opportunities to will provide a far better future for you and your family.

Information. Prior to introducing you to a specific business opportunity we will have you read and sign a "Non-Disclosure / Non-Circumvention Agreement." This Agreement states, in part, that we are going to provide you with information that is confidential and proprietary and must be maintained as such.

If we have a business for sale that may be of interest to you, you may receive a one page summary of the business, or for some larger businesses an Executive Summary of several pages. If, after reviewing the one page summary, your interest in that company is still strong, you will receive a business package that, in most instances, will include financial statements and/or income tax returns for the business you are interested in. It may also contain lease information or information related to the real property if it is for sale as well.

At this juncture we will probably part company because you will have a lot to think about! Take a couple days and take the package home, work through the numbers, create a Growth Plan for the business in which you explore ways to continue or improve on what you see. Then, call us. We want to hear your reaction. You do not hurt our feelings if the business does not appeal to you. If it does appeal to you and you would like a tour, we will arrange one. This usually requires 1-2 days notice for the Seller. If it does not appeal to you please return all materials you have received and we will begin a new search.

On Site Visit. We will actually visit the site and in most instances you will meet the Seller. This usually takes around an hour. It is important at this juncture to point out that it is very important for you to make an excellent impression on the Seller as he or she may very well become your Banker with Seller Financing. This is extremely important in today's marketplace, as funds are increasingly difficult to obtain from banks. Particularly when Real Property is not involved.

A good way to approach this is to prepare a personal financial statement and resume for yourself as well as obtaining a current credit report. Include references. These things are nothing more than what any prudent lender is going to ask you for and that’s exactly what the Seller will be if he accepts an offer from you to purchase his business.

Be frank in what your expectations are and create an agenda to keep you on track. This will let the Seller get to know you somewhat before he actually meets you. The tour is important for not only familiarizing you with the actual physical facility but it is the first time a Seller will probably meet you in person.

Remember, the first impression is a lasting impression. At the actual tour please refrain from discussing the price, terms of sale, down payment and any other topics that should be addressed later in your offer. Sellers are usually reluctant to speak about their asking price (terms, etc.) unless it is through an actual offer written and prepared through ExploreBiz. It is usually OK to ask them about why they are selling, their employees, management style and any other question you may feel is necessary to help you get to know the business.

Much of this information may have been given to you in the Information Sheet and the Business Package we have prepared on the company during the Office Interview. Study this information before the tour. By all means, if you are unclear as to something or do not understand something: Speak Up! You can't know the answers if you don't ask the questions.

There are now two roads open to you. You may want to digest what you have just seen for a few days. This is fine. Call us in a couple days and again, we want to hear your reaction. Or you may want to come back to our office with us and prepare a first draft of an offer. Congratulations! You have come a long way in the difficult journey to find a business you like!

Offer. When you are ready we will prepare an Offer to Purchase. This should be the offer that makes sense to you. This is usually a 3 to 4 page document that will outline your terms of purchase. It is a written document that requires your signature and an "earnest money deposit". It will usually be open for acceptance 2-5 days and we will convey it to the Seller. Your earnest money deposit will be held by the Broker until you and the Seller are "all on the same page", that is, you are both in agreement as to the terms of the sale. In the event you cannot agree your deposit will be returned to you immediately.

The Buyer and Seller negotiate through ExploreBiz on the Offer to Purchase. It may take two or three counter offers before all the parties are satisfied. This process can take anywhere from one day to two weeks. It is important that both the Buyer and the Seller differentiate between emotions and intellect. Buying or selling a business at the right price requires as much work with your head as with your heart!

Once everyone is in agreement and all signatures are on the Contract your earnest money will be deposited and held pending the Closing by an Escrow company in the community in which the business is operated or may be held by ExploreBiz in their escrow account (at the Closing the earnest money will be credited to the purchase price.) After this the process of "Due Diligence" continues. If there are any contingencies in the contract it is expected these be removed within a reasonable time (5-10 days is a reasonable amount of time for most contingencies.)

When all the contingencies are removed the Closing will be set. You will be expected to make the necessary arrangements with utility companies and licensing agencies for the transfer of ownership.

Closing. This is usually a very exciting day and sometimes emotions can run high. A seller who is parting with his "child", a doubting spouse's comments, a nervous first time buyer's anxieties...these are all normal reactions to a change in a person's life. Understanding this and allowing for some unusual behavior is part of our job. Again, we act as intermediaries in keeping the deal on track.

Post Closing Congratulations! You have completed a difficult passage and are to be rewarded for your perseverance. You have traversed and passed many stumbling blocks to get where you are now. (Nobody said this was easy!) Now the day to day operations of your business should consume your attention. We are available to you post closing if you have any questions we can answer. We look forward to your success and the day you will return to us to sell your business for you! Good Luck!