How long does the process take to buy a business?
The process to buy a business is a detail intensive exercise and can vary widely depending on the situation and type of business. If you want to buy a manufacturing business your process will vary greatly as compared to buying a restaurant. Here are the various stages with some time estimates (not every situation will have all of the elements below and some circumstances could have more steps). This typical time estimate starts after you’ve identified a business you’d like to try to buy:
- Initial meetings with seller to learn general information about the business – 2 weeks
- Research the Industry – 1 week
- Negotiate contingent offer based on financial and other information provided by Seller – 1 week
- Full Diligence – 3 – 4 weeks (total for items below)
- Review tax returns, financial statements, 941 returns, sales tax returns, bank statements, licensing issues, customer records, vendor records, etc (If you want to improve your accounting knowledge click here)
- Negotiate terms of any lease assumptions for buildings, equipment, etc with whomever holds the leases.
- Meet with SBA loan officer and prepare loan application and business plan for submission to Small Business Administration. Click here for a article on using an SBA Loan to buy a business.
- Meet with 401(k) Plan rollover specialists to begin process to utilize your 401(k) retirement funds for use as down payment.
- Apply for any licenses necessary for operating the business.
- Consult with your CPA or other advisors relating to the purchase tax consequences, etc.
- Buyer and Seller negotiate and agree on final closing documents: – 2 – 3 weeks
- Training and Consulting agreement Seller will provide buyer
- Non-compete agreements
- Representations, Warranties and Indemnification clause
- Purchase and Sale Agreement
- Closing – Final agreements signed, buyer and seller exchange funds and business turned over to buyer