The following is some basic information for anyone considering purchasing a business or selling a business in New York, New Jersey or Connecticut. The more information and knowledge both sides have about buying and selling a business, the easier the process will be.

A Buyer Profile

The buyer profile is a look at the composition of the average individual buyer looking to replace a lost job or wanting to get out of a bad job situation. Most likely he is a male (however, women are increasingly going into business for themselves, so this is changing). Nearly 50 percent will have less than $100,000 to contribute toward the the purchase of a business. More than 70 percent will have less than $250,000 to invest.  The funds, or part of them, will often ome from personal savings.  The second source will likely be financial assistance from family members. He (or she) is likely to never have owned a business before. Despite what he thinks he wants in the way of a business, he will most likely buy a business that he never considered until it was introduced.  A business broker will very likely be the ones that introduce the buyer to these new opportunities that they have never considered before.

His (or her) mainreason for going into business is to get out of his (or her) present situation. The potential buyers now want to do their own thing, be in charge of their own destiny, and they don't want to work for anyone. Money may be important, but it's not at the top of the list.  In fact, it is probably a couple spots down on their priority list. In order to pursue the dream of owning one's own business, the buyer must be able to make that "leap of faith" necessary to take the plunge. Once that has been made, the buyer should review the following tips.

Importance of Information

When you are looking at small businesses you will have to dig up a lot of information. Unfortunately, small business owners are not known for their excellent record-keeping. You want to make sure you don't overlook a "gem" of a business because you don't or won't take the time it takes to find the information you need to make an informed decision. the main point of this investigation is to try to get an understanding of the real earning power of the business. Once you have found a business that interests you, learn as much as you can about that particular industry.

Negotiating the Deal

Understand going into the deal that your friendly New York banker will tell you his bank is interested in making small business loans.  However, this often changes when it comes time to make the deal. The seller finances the vast majority of New York-area small business transactions. If your credit is good (and we hope it is), supply a copy of your credit report with the offer. The seller may be impressed enough to accept a down payment that is less than he or she desires.

Since you can't expect the seller to cut both the down payment and the full price, decide which is more important to you. If you are attempting to buy the business with as little cash as possible, don't aggressively try to lower the full price. On the other hand, if cash is not a problem (is this ever the case?), you can attempt to reduce the full price significantly. Make sure you can afford the debt you take on--don't obligate yourself to making payments to the seller that will not allow you to build the business and still provide a living for you and your family.

Furthermore, don't try to push the seller intoa  corner. You want to have a good relationship with him or her. The seller will be mentoring you in the running of the business and acting as a consultant, at least for a while. It's all right to negotiate on areas that are important to you, but don't negotiate over a details that really don't matter. Many sales fall apart because either the buyer or the seller becomes stubborn, usually over some minor detail, and refuses to bend.

Due Diligence

The responsibility of investigating the business belongs to the buyer alone. A business broker can help tremendously in this area, but don't depend solely on anyone else to do the work for you. You are the one who will be working in the business and must ultimately take responsibility for your decision to buy it.  However, there is not much point in undertaking due diligence until  you and the seller have reached at least a tentative agreement on price and terms. Also, there usually isn't reason to bring in your outside advisors, if you are using them, until you reach the due diligence stage. This is another part of the "leap of faith" necessary to achieve business ownership. For a number of reasons, outside professionals normally won't tell you that you should buy the business, nor should you expect them to. In fact, if pressed for an answer, they will give you what they consider to be the safest one: "no." You will want to get your own answers--an important step for anyone serious about entering the world of independent business ownership in New York.