3.  Meeting Business Owners and Touring the Businesses

Once a short slate of candidate businesses has been developed, the buyer or the buyer's business broker can begin scheduling appointments with business owners to see the facilities and operations.  Most business owners will require that all meetings be held outside of business hours so as not to prematurely disclose the potential sale to customers and employees.  The buyer and seller will discuss a variety of issues about the business, including the basis upon which the business was valued and the terms of a potential sale.  This information is confidential and should not be disclosed to anyone other than the buyer's advisors and spouse.  Depending on how serious the inquiries are, the buyer may wish to be accompanied by an attorney, to facilitate the discussion of key matters and to help complete an earnest money agreement and begin the due diligence process.

4.  Doing Due Diligence and Making an Offer

Due diligence is a thorough review of the business's prior and forecasted performance, assets, liabilities, personnel, and other details.  It can be very time consuming for both the buyer and the seller, and quite expensive because of fees for professional advisors, acquiring copies of documents, conducting lien searches, and creating closing documentation.  It is not in the best interests of either party to go through the due diligence process unless the buyer is serious and willing to make an acceptable offer to purchase the business.  Therefore, before the process begins, an earnest money agreement must be made. 

The earnest money agreement provides the terms and conditions under which the buyer and seller are willing to transfer the business.  The amount of earnest money required with the agreement depends on the price of the transaction.  In general, it must be high enough to demonstrate a buyer's serious intentions and to motivate the seller to take the business off the market for at least fifteen to thirty days while due diligence is completed.  A typical earnest money amount for small to mid-sized businesses is $5,000 to $10,000.