Whether you want to buy or sell a business, you should know how a buy sell business works. Just like in any other transactions, there are stages or phases that you need to follow to legally complete the process. Needless to say, you have to understand it from different standpoints and that includes both the seller and the buyer’s points of view.
Fortunately, we have compiled steps on how business for sale works, regardless if it is physical or online business for sale Hong Kong.
Steps in Buying/Selling a Business
Selling or buying a business is not the same as selling or buying clothes in a store. Although some of their processes are similar, there are heavier legal responsibilities in business for sale. Hence, you must know all the steps involved in takeovers to ensure that no major issues are waiting outside your doorstep.
Stage 1: Prepare the Business for Sale
This stage is crucial for the seller since it can affect how the potential buyers see the business. If you are the person planning the sale, this is where you should identify the weaknesses of your business. They can be used to drive down the market value of what you are selling so identifying them beforehand can help eliminate those factors.
Stage 2: Create a Buyer’s List
Stage 2 is where the investment banker creates or develops a list of potential buyers. The seller then reviews the list to find a buyer that is a good fit for the company. On the other hand, the buyer creates investment criteria that they can share with their mergers and acquisitions advisors. These include EBITDA, revenue, and industry and location.
Stage 3: Draft a Letter of Intent
Generally, the letter of intent (LOI) is non-binding. It is a basic agreement between the buyer and the seller of terms and conditions involved in the business transaction. In this stage, the buyer’s strategy is to draft the agreement as general as possible to increase its flexibility for negotiation in the proceeding stages.
On the other hand, the seller’s primary responsibility is to clarify any vague language or terms in the agreement to avoid misinterpretation. When the agreement terms and conditions are clear, there is a limited amount of disagreement and renegotiation. Once the LOI is signed, the leverage shifts from the buyer to the seller. The competition is eliminated in this stage.
Stage 4: Conduct a Due Diligence Investigation
This stage allows the buyer to validate every information that the seller provided regarding the business for sale. It is often time-sensitive and does not exceed 90 days. Generally, the buyer should act right after the LOI is signed.
Stage 5: Close the deal
At this stage, the buyer must have completely understood the terms and conditions indicated in the purchase agreement already. He or she should know how those terms can affect the purchase price of the business. From the seller’s perspective, he or she should prepare for the transition period.
If you are looking for a Business for Sales Center, Easy Buy Sell Business Hong Kong is an excellent option. It is a Business for Sales Platform that can help you with the whole business takeover phases. The company can provide you with a Business for Sales Portal which you can navigate to see all available opportunities.