The BizSales Business Buyer System

The BizSales Business BuyerSystem has been tested again and again has proved to be the best system for Buying a businesses. It has been used in 100s of sales and has been fine tuned to provide a simple yet effective method of buying an SMEs.

The main parts of the system are;

1 Research, Research, Research
• Get Knowledge - Know everything related to your target business
the sector, the market, the local area, how to run this type of business
• Get Self-Knowledge - Know yourself intimately
Your likes, dislikes, your skills, competencies, experience, knowledge
• Get Speaking - Speak to everyone you know (& don’t know) about running a business
Your friends, your family, business advisors, and especially other business owners
• Get Trained – “Success in business requires training, discipline and hard work.” Rockefeller
You must complete a new business owners’ course at your local enterprise/business centre
• Get Experience - Good judgment comes from experience.
You must work with other business owner and do every facet of their role.
• Get Money – Cash talks
Know exactly how much you can raise before going any further

2. Register as a potential buyer
Fill in as much details about yourself and the type of business you are looking for.

3. Enquire about suitable businesses
• Request more details about suitable businesses
• There are no bad businesses, just normal businesses with the wrong owners.
• Most businesses accounts have little value in accessing a business. They are only the start of your analysis.
• Don’t rely on the Financial Statements or Accounts of Small Businesses. They are based on whatever information was supplied by the owner to an accountant. In many cases they are at best, misleading. Whilst the final version may be professionally presented, they were arranged by an expensive accountant to minimize profit, thus minimizing tax for the owner.
• Don’t rely on the Financial Statements or Accounts of Large Businesses. They are based on whatever information was supplied by the company management to an accountant. In many cases they are at best, misleading. Whilst the final version may be professionally presented, and may even be audited, they were arranged by an expensive accountant to maximize profit, thus increasing shareholder value.
• Experienced business buyers visit the business; do their own accounts on the back of an envelope (i.e. sales, less costs, less overheads equals the real profit), before ever looking at the company accounts. In-experienced buyers, with little real life experience of business or producing accounts make their buying decision based on the company prepared accounts and never get to see the real business.

4 Initial viewing and valuations (Mystery Shopping Trips)
• Be discreet - the owner may not want staff to know they are selling, but be thorough and record key findings.
• Sample the product and service in each. How was the customer experience for you?.
• Sit back and think if you could run that business; what would you do better; what changes would you make.
• Sit outside the business on several different occasions and count the customers. Work out on average how much they spend per visit, this will give you a rough estimate of what the real turnover is.
• There are no bad businesses, just normal businesses with the wrong owners.
• This results in an under performing business, and thus the reason for sale.
• You are not buying this business as is, but the new business with you in control. Can you see the opportunities?

5 Valuation / Financial Analysis
• The turnover – Could you increase prices and/or increase customers – how ?
• The costs – Could you decrease purchases and wages – how ?
• The overheads – How could you improve on these e.g. rent, rates, electric, gas, phone etc
• Complete a business plan based on this information but making your changes
• If you are not going to make any changes, will the business continue as is - Why?
• Financial advice from accountants or advisors tends always to be conservative – they are trying to protect you by showing you all the risks. Do consider their advice carefully, but you make the business decision – not them.

6 Arrange finance
• 90+% of all finance to purchase a business is supplied by the high street banks
• Banks and other lenders ask 2 fundamental questions, and here are the answers;
Bank: How are you going to guarantee the money the bank lends you?
Answer: “I will sign over my house/property as security.”
Bank: How are you going to pay back the loan & interest whilst still generating a wage and a profit?
Answer: “From net profits as illustrated in my 3-5 year business plan on your desk.”
• If you answer the above questions correctly and convincingly then most banks will lend up to 70% of the available equity in property you own in UK/Ireland.
• If you don’t then other sources of finance are parents, friends, credit cards, flexible mortgages etc

7 Meet the Buyer & Negotiation
• Arrange (through the broker) meeting(s) with the owners
• Discuss all facets of the business
• Re-create/test the financial statements of the business in discussion with owner
• Agree what is included / excluded e.g. stock, furniture, fittings, debtor, creditors etc etc
• Agree what terms would be sought/available
• Make notes of the conversations & agree on these
• Ascertain the best lowest price the owner will agree upon

8 Letter of Intention “Head of Terms” written offer – Subject to contract
• Discuss the meeting(s) with the broker and you’re thoughts/views on going ahead with a purchase
• Write a formal letter of offer from your meeting(s) notes. (Broker can supply a sample of a typical format)
• Head your letter subject to contract and include this phrase in all written communication.
• The broker will check it to ensure that everything (where possible) is covered eg staff, stock, vehicles etc
• The letter is passed to the seller. If accepted he countersigns it, thereby accepting the offer.
• A reservation or booking deposit is paid on acceptance by the seller (refundable) either £1000 or 1%
• The business is taken off the market and the buyer is give a fixed time to formally check out the business.
• Deposits are held in a trust/client account by the Broker, similar to a solicitor. Never pay a deposit to the seller. If the deal fails you will never get it back.

9 Due Diligence
Due diligence is the process of research and analysis that takes place in advance of an takeover of a business, where the potential buyer investigates the background and principals of the target company. It would typically involve verification of financial statements, checking for regulatory and licensing issues, identifying debts and judgments, and uncovering any legal matters. The buyer uses it to understand risks (if any) involved in the investment.
• Develop a checklist of questions/areas to investigate (Broker can supply a sample of a typical DD checklist)
• Develop a plan and supply to seller i.e. to facilitate arranging staff, accountants, financial records etc
• Satisfy yourself that everything for sale is as described
• Discuss discrepancies with seller and make adjustments to details to be contained in final contract
• Collate notes for preparation of final “Sale and Purchase contract”

10 Sale and Purchase Agreement
• Discuss the meeting(s) and findings with the broker and you’re thoughts/views on going ahead with a purchase
• Write a “DRAFT Sale and Purchase contract”. (Broker can supply a sample of a typical format)
• The broker will check it to ensure that everything (where possible) is covered eg staff, stock, vehicles etc
• The DRAFT contract is passed to the seller and they discuss any modifications/changes with the buyer.
• If both parties are prepared to be legally bound by this document then the word DRAFT is removed and
(a) Both parties sign the document; or
(b) Both parties seek professional or other advice on what they are about to do.
• On signing of the agreement, a 12.5% deposit is paid to Broker in Trust. The sale is now legally irrevocable.
• If the seller completes the sale and hands over the business, the seller is given the deposit on completion. If the seller does not complete, the deposit is promptly returned to the buyer.
• If the buyer completes the sale i.e. hands over the payment for the business and any other terms, the seller is given the deposit on the completion date. If the buyer does not complete, the deposit is given to the seller.
• Deposits are held in a trust/client account by the Broker, similar to a solicitor. Never pay a deposit to the seller. If the deal fails you will never get it back.

11 Completion
Even after you signing a contract detailing the price and terms of sale, the deal could still fall through. Each party has to meet certain conditions of sale to complete, including:
• transfer of leases
• transfer of contracts/licences
• transfer of finance
However most of all of this should be completed before the completion date, which a final form signing session on the premises or at a local hotel or solicitors office. The day of completion should be a non event with no stress.

12 Post Completion
It is essential that good relations are maintained between buyer and seller after the event. This is important for handover of customers and importantly for employees.

Click here for the details of what a broker would do for me.