Are you thinking about buying a business in Orange County, Southern California or elsewhere to build your future, gain personal freedom and independence but not sure where and how to start?  How do you get started and find the right business?  What are the steps involved to find the best business for you? Before you start your search, we suggest you step back and look at what types of businesses are for sale.  It will surprise you how many different types of businesses in Orange County that there are.  We also recommend keeping an open mind with respect to business types and look at broad industries, even look at some that you have not necessarily considered.

Steps in Buying a Business

1) Inquiry, NDA, Buyer Profile, & Initial Meetings

You most likely are inquiring from one of our Internet ads for a business for sale we represent. To get detailed information about the business you will need to complete our NDA (Non- Disclosure Agreement) and Buyer Profile. One of the biggest concerns for business owners regarding the sale of their business is maintaining confidentiality about the prospective sale of their business. To ensure the name of the company and information about it remains confidential, we require a signed Confidentiality Agreement and Buyer Profile prior to providing any detailed information about the company. The Buyer Profile provides us with a snapshot of your financial position, credit score, available cash for down payment and purchase, background, and your experience.

After receipt of your signed NDA and completed Buyer Profile we send you the Confidential Information Memorandum (CIM) which includes recast financials statements, staff list, equipment list, company history and information, and SBA financing information.


2) Confidential Information Memorandum (CIM) & Initial Meetings


3) Prepare Offer & Offer Acceptance

We meet with you to prepare the offer on the CABB (California Association of Business Brokers) Asset Purchase Agreement or Stock Purchase Agreement along with any Addendums required for additional terms and conditions. When the Offer is complete and signed by you we collect an Earnest Money Deposit check made out to the escrow company which is held uncashed until escrow is opened. We present the offer to the Seller and review it in detail, explaining the offer and your thinking and rationale behind the offer.

Your offer will have 3 primary contingencies, 1) successful completion of Due Diligence review, 2) obtaining a satisfactory new lease or assignment of the current lease, 3) SBA financing approval and funding.

Offers are seldom accepted As-Is, even if they are excellent offers. Obviously, price is the most common negotiating point and frequently terms need to be refined or clarified. We facilitate The negotiations, prepare the Counter Offer and amendments to reach a mutually acceptable offer. When the offer and counteroffer have been signed by all parties we have a contingent Purchase Agreement and begin Due Diligence.


4) Buyer Due Diligence

Due Diligence, along with the offer and negotiations, is one of the most critical steps in buying a business. Due Diligence is a Contingency for both Buyer and Seller and a critical milestone. During Due Diligence, the Buyer verifies the revenue, expenses, earnings, and financial wherewithal of the business. You will have access to all of the company’s financial records, bank statements, tax returns, and other documentation. There is also Seller Due Diligence where the Seller reviews the Buyer’s qualifications, financial position, and overall capabilities. At the conclusion of Due Diligence Buyer and Seller remove the Due Diligence Contingency and escrow is opened. If either party is unsatisfied with their Due Diligence review then there are three options 1) resolve the issues or questions that arose during Due Diligence, 2) Return the Buyer’s earnest money deposit as specified in the Purchase Agreement and terminate the agreement, or 3) renegotiate the Purchase Agreement based on the new findings or facts.


5) Escrow

After Due Diligence is complete, and both Buyer and Seller have removed this Contingency in writing, escrow is ready to be opened. Note that other contingencies such as bank financing and Lease contingency will still be open. Escrow will draft the escrow instructions, cash the Buyer Deposit Check, and open escrow once the escrow instructions are signed by all parties. During escrow, the Escrow officer will run lien searches, publish the Notice To Creditors, obtain releases from tax authorities including Franchise Tax Board, Dept of Tax & Fees (sales tax-seller’s permit), EDD, etc. The escrow officer will send information requests to the Buyer and Seller during the escrow and documents for signature.


6) SBA Financing

The SBA lender approval process takes a minimum of 45 days if the buyer and seller promptly send all requested information to the bank. Frequently SBA Loans can take 60 days from the time of submission. Consequently, we typically start the SBA lender approval process before escrow is opened. The SBA Lender (Bank) will require information from both buyer and seller in order to approve the loan. This will include 3 years of financial statements and tax returns from Buyer And Seller, Personal Financial Statement and resume from Buyer, and other information. A new or assigned Lease in the name of the Buyer is required prior to the close of escrow. We recommend introducing the Buyer to the Landlord as early as possible after escrow is opened to give the Landlord adequate time to review the Buyer’s application and prepare a new lease or assignment of lease. Note that if an SBA loan is involved the bank may require a 10 year Lease including options. In some cases, this can be waived if the location is not critical or unique to the business. Any required licenses will need to be obtained by The Buyer before escrow can close.


7) Closing & Training


For more about how to buy a business preview my book, “Own your Future, Straight Talk about Buying a Business and Building Your Future.