10. Writing Conditional Offers for Buyers
Most potential business buyers are first time buyers. They have not purchased businesses before and need professional advice to write an offer. If the business has been sold with the help of a business broker, the broker generally helps potential buyers write an offer for the business and do not require compensation for the work as the brokers are generally paid by sellers. As a result buyers feel secure putting in a confidential offer even if they do not have all the information they need about the business. The offer is perceived as risk free since it only becomes a commitment after the buyer has inspected the business and removed all conditions. When the offer becomes firm, then the buyer can spend money on lawyers and other professionals.
11. Selecting Offers
In some cases the business attracts more than one buyer and receives multiple offers. It become a challenge to make a decision about which offer to accept. While the price is a determining factor, it is not the only factor. Remember that the offers at this stage are only conditional offers.
12. Accepting a Conditional Offer
Before a potential buyer can make a firm offer on your business, he/she will need to check that the information you provided him with is accurate. For this reason, the buyer will put some conditions in the offer. If the conditions are not fulfilled the business will not be sold and you will have to reimburse his initial deposit. Some of the conditions will be related to your business and all information provided to the buyer initially. Other conditions are more related to the buyer. For example, if the buyer needs financing from a bank and will need to get bank approval. It is generally wise for the seller to consider not only the offered price but also the conditions. For example an offer on a business with a condition on financing should be considered with skepticism. What is the probability that the potential buyer gets the bank loan?
13. Due Diligence Process
The due diligence period starts when the buyer makes a conditional offer and ends when the buyer makes his/her final decision about buying a business. It is not uncommon that the buyer renegotiates the purchase price after the due diligence period when confronted by surprising information that was not disclosed initially. This doesn't mean that the seller should accept to renegotiate the price or terms for superfluous reasons.
14. Closing
The closing happens after the buyer has performed his/her due diligence on the business and has been satisfied with his/her findings and after the buyer's lawyer has checked the ownership of the business and possible liabilities such as tax or liens on the the business assets. The business is considered sold only after the deal closes.