Buyer FAQ
Buying a Business FAQ
- Historic performance rather than pro-forma
- Immediate cash flow
- Trained employees in place
- Established suppliers
- Established customers and referral business
- Training by the seller included in the purchase price
- Potential of seller financing
A few advantages of buying a franchise are:
- Instant name recognition of a proven product or service
- Ongoing support - you are in business for yourself but not by yourself
- Over 90% of new franchises are successful
- Proven operating systems in place
- Opportunity to add additional franchise locations
- More flexibility in location of business
- Lower Acquiring Cost, as compared to purchasing an existing business
- Training by the Franchisor
- The availability of financing programs, established by the Franchisor
If you decide to purchase a franchise opportunity, be sure you have enough working capital to support the business and your family for two years.
- First consideration is: Do you see yourself working in the business?
- Amount of down payment available
- Total Owner’s Discretionary Earnings
- Location
- What kind of training will the seller provide?
- Can you build sales?
- Can you reduce expenses?
Gateway MA FAQ
- We listen to you. We get to know you, your goals, your expectations about the business, your financial requirements from the business, your level of investment and your skills. What do you love to do? What type of business do you NOT want to buy? We will introduce you to businesses that suit your needs.
- Gateway guides you, step-by-step, through the exploration of available businesses, negotiations, due diligence, financing and, ultimately, to the Closing Table.
- Results. Gateway Brokers leverage their knowledge, expertise, skills and professionalism to overcome any obstacles arising during the transaction. We keep all parties involved moving efficiently towards the Closing Table. You and the Seller work at arm's length while the Broker works as an intermediary allowing you and the Seller to maintain a working relationship throughout the transition process.
- We guide you through the process: Gateway Brokers can assist you in getting all paperwork related to the transaction ready. We know the process for preparing for the closing process!
- It depends. The answer the Seller likes best is 100% of the purchase price. Understandably, most Buyers prefer to leverage their cash as a down payment leaving money in their account for any unexpected expenses and maintaining financial peace-of-mind for the family.
- If the tax returns of the business are strong enough to secure bank financing, 20% of the purchase price is typically enough of a down payment for an SBA backed loan. If the purchase price includes more than $500,000 in Goodwill or a Conventional Loan is selected the down payment amount may increase to 25-30%.
- If the tax returns of the business do not support bank financing, Seller Financing may be an option.
Typically speaking, the higher down payment offered by the Buyer, the lower the purchase price of the business. Remember, you don’t want to commit all your cash. You’ll need some cash on hand for operating expenses, deposits, and other requirements that come along with buying a new business. It is important to have an extra cushion as well for emergencies, unforeseen circumstances and your own piece-of-mind.
As a general rule of thumb, expect to pay 1 to 1.5 times, the annual owner’s discretionary earnings as your down payment. This can vary depending on the circumstances for you and the seller.
Whether is it bank financing or Seller Financing, expect to personally guarantee the loan.
Buyer Confidentiality FAQ
- Employees: You want trained employees who know the daily routine and the inner workings of the business. They are a valuable asset to your company! When you are ready to make the announcement, you should announce in conjunction with the Seller.
- Customers: Concerns that a new owner will not honor warranties may encourage customers to seek other companies that offer similar products or services.
Buyer – Seller meetings and tours are scheduled after hours and on weekends so no employees or customers are on-site.
As the transaction nears closing day, outside parties, such as bankers, appraisers, surveyors, or licensing agencies may need to be brought into the transaction. All outside parties are instructed on the confidential nature of the transaction. We cannot control the actions of outside parties and their approvals many be necessary to get the transaction finalized. However, Gateway does everything in its power to stress and enforce strict confidentiality.
You can trust Gateway to keep your confidentiality a top priority: keeping the sale confidential and protecting the value of your future business.
Negotiations FAQ
- Price is not everything: The terms of the sale matter and should be considered. How the payout will occur, your future commitment to the business, and what relationship you may have with the former owner are all things that you should think about before the final sale.
- Make strategic concessions: Sometimes, to get what you really want, you’ve got to give away something valuable. This builds good will between you and the Seller. Additionally, you have leverage to ask for something just as or even more valuable than what you just gave up.
- It’s OK to walk away: It’s very easy to get tunnel vision when it comes to the negotiation process. Keep in mind a specific number that defines your comfortable cash investment. By keeping that number in mind, you help prevent getting into a situation beyond your means.
Closing Process FAQ
A commercial escrow company facilitates the funding and closing of a business sales transaction. They are a neutral party holding the escrow money. They efficiently handle:
Please note: Gateway Mergers and Acquisitions Brokers do not provide any legal, accounting, tax advice or any related services to Buyer or Seller.
contact us
Gateway’s brokers are always willing to assist business owners and prospective business buyers with education, resources, and guidance through the process of buying and selling businesses. We are here to answer any questions to make the selling & buying process a smooth transition. Call or Email for a free consultation.