SUBMITTING YOUR INQUIRY AND QUESTIONS TO WIN A BUSINESS:
You’ll certainly have questions about the business you are interested in possibly buying. Keep in mind that listings, particularly some of the more popular ones, can attract 20 or 40 inquiries at once. Each prospect has a list of questions sent to the broker or owner which can lead to inquiry overload! About 95% of the inquiries received do not result in an offer, so part of a broker or owner’s job is to distinguish serious inquiries from those who are simply curious. The buyers that end up snatching up the best listings are those who to these three things:
They explain what their investment criteria are and how they plan to fund the purchase.
They supply a bit of background about themselves, their expertise and interest level, so they stand out from the crowd.
They separate two kinds of questions: a) Essential questions in order to make an offer and b) Due diligence items that will be researched before the buyer is committed to closing. Due Diligence is the period where you get to explore and verify details about the business.
Doing these simple things can get the attention of a broker or owner and can make you the call that is first returned.
…Here is how this list might break down into 2 separate stages:
“In order to make a reasonable offer, I will need to know the following:”
Does the company need any industry-specific knowledge? (expertise criteria)
How many hours does the owner work? (lifestyle criteria)"
“If this looks like a fit for me, during the Due Diligence process, I will be requesting more details around the following and may request training from the Seller in these areas:”
What systems are used?
What is the bidding process to find new clients?
How long out are accounts receivable, typically?
Do you have samples you could send?
What do on-site inspections cover specifically?
Do you have a sample components list?
What is the typical work schedule for the business both on site and at home?
What does the company’s contractors do specifically?
How long before a client returns for their next service?
Here is an example of what a full list of questions looks like…
What systems are used?
Do you need any industry specific knowledge?
How they find new business and what is the bidding process to win new clients?
How long does it take to collect complete payment for services rendered?
What do on-site inspections cover specifically?
Do you have a sample components list?
What is the typical work schedule for the business both on site and at home?
What does the company’s contractors do specifically?
How long before a client returns for their next se3rvices?
THE MAGIC OF A TERM SHEET WITH CONTINGENCIES
Contingencies are a great tool to explain your preferences or concerns to the broker or owner. Listing these concerns spells out what are deal breakers that we need to solve for before you would be interested in committing to buy the business?
Below is a sample Term Sheet that outlines the key components of your offer. If you send this to a buyer, you will be considered a serious inquiry. The document is non-binding so you are not making a legal commitment, but you are beginning a negotiation. If you don’t know what offer price to give, you can also explain to the Seller how you will calculate the offer price. e.g. “Purchase price will be 2.5X EBITDA”.
SAMPLE TERM SHEET (CLICK TO DOWNLOAD .DOC THAT YOU CAN EDIT)