Businesses For Sale Gauteng

Businesses For Sale Gauteng


Effective Recommended Procedure to Buy a Business:

Most business buyers and specifically persons that are new at looking for a business to buy, have received no guidance on the process but may already have made up in their own mind how they see the process develop. This process could easily result in loss of time, opportunities and sometime even money. At Tri Source it is our experience that the following procedure offers a safe, inexpensive yet effective procedure to identify and proceed with the acquisition of your choice:

1) Identify your opportunity:

  • VISION
    Every buyer has his own criteria and ideas around his or her ideal business to buy. This is 100% a function of your vision and how you see yourself in a business going forward. No buyer should consider acquiring a business in the absence of this vision. Buying a business (OR NOT) purely as a result of everyone else thinking it is a good choice (OR NOT) is the biggest mistake most buyers make which result in the post-acquisition failure.
    Your friend, spouse, accountant, consultant, parent, attorney, religious leader etc. all have their own idea (vision) about a great business and could influence your thinking in the wrong direction. It is therefore a difficult and lonely process. It is also one of the reasons why Business Byers often consider partners which partnership eventually result is stress and possibly ultimate failure.
  • FOCUS ON 3 ELEMENTS WHAT YOU BUY
    It is extremely important to evaluate all your opportunities based on the 3 broad parameters:
    – Income stream
    – Asset Value
    – Lifestyle
    For more detailed information and explanation read the article what buyers buy when they buy a small business.
  • INVESTIGATE OPPORTUNITIES AND SHORTLIST
    Investigate the market and identify 3 or 4 opportunities that attract you most. There are many opportunities in the market at any point in time and most of the information can be found on the internet.
    Tri Source is not a “wholesale” broking firm offering 1000’s of opportunities at any one time. It is increasingly focusing on quality larger business opportunity of a technical nature. It is therefore possible that you identify one or two opportunities on the Tri Source Business for Sale web page but also 2 or three opportunities with alternative brokers.
    There may be many other parameters that apply to the specific business you are looking for that you may want to consider in drawing up a short list of prospects:
    Business for sale Gauteng, Business for Sale Johannesburg, Business for Sale Pretoria, Business for Sale East Rand, Manufacturing Business for Sale, Engineering Business for Sale… any criteria important in your books.

2) Select your Broker:

It is very important that you deal with reputable broker as a great very many small mistakes in the process of acquiring a business can cost a whole lot of money.
– Make sure the broker is registered with the Estate Agency Affairs Board (EAAB) this is the law! Ask for the Fidelity fund Certificate or check on the EAAB website.
– Make sure your agent is at least a FULL STATUS Agent. Many broking firms make use of Intern Agents and even allow them to negotiate transactions and write contracts. This is illegal and could potentially cost the buyer and seller a whole lot of money.
– Ascertain the knowledge and experience of the broker in the art of broking and also his or her relevant business/industry knowledge.

3) Conclude Non-Disclosure, Confidentiality Agreement:

Many Business Purchasers are uncomfortable with this step as they have to disclose personal information about themselves as well as disclose sensitive information with regards to their ability to finance an acquisition.

It would be helpful for the prospective Business Purchaser to empathise with the Business Seller by understanding how he feels about the free exchange of sensitive information about his business, employees, customers, financials etc.

It is also legal requirements of FICA and POCA and the conclusion of the NDA protects all parties.

It is very important to know that – once the NDA has been signed- the information harvested about the prospect can EXCLUSIVELY be used for the purpose of acquiring the business

4) Obtain more information from the Mandating Broker:

It is important that you deal with the MANDATING BROKER as this person is already advanced in its relationship with the seller and has some deeper information that may be very helpful in your decision if you want to be introduced to the Seller of the Business.

The Business Broker should also have a basic Business Profile available on the prospect which provide more detailed information on the business as well as some financial headlines.

It is during this discussion that you can establish what the business is called, where it is and some other specifics you may feel important to make your final decision if you want to be introduced or not.

5) Introduction:

Prepare yourself for the meeting by making a list of information you wish to extract during the meeting. You may want to cross check the accuracy of the information provided in the Business Profile but there is no necessity on your part to verify the profitability at this stage. The information provided can be taken on face value and verified during the due diligence.

Remember that the Seller is equally interested in determining you capacity and ability to buy and run his business and the failure to impress could easily result in a false start!

Although the initial meeting is normally one that takes between 60 minutes and 90 minutes it is the one where you will get a very good feeling if this is the one you want to investigate further or not. Information around the cash flows, profitability, growth opportunities and other lifestyle information would soon tell you if you relate to this opportunity or not.

Your VISION- doing what the seller does and doing it better than what he is doing it- is normally the strongest indication that you need to take discussions and investigation to the next level.

6) Collect advanced information on Business For Sale:

You may decide after considering the prospect for a day or two that you really like it and wish to take the opportunity to the next level investigation. You may at this stage only have one or perhaps two Businesses for Sale in your desired area Gauteng or Johannesburg but should ideally not have a long list of businesses entertained when detailed investigations start.

The reason is simply that you will most likely eventually like the price of one, product of another, hours and effort required of the 3rd, profit of the 4th… etc.

Ask your broker for detailed financial statements and any additional documents and information that you require to make a decision on a possible offer that you want to extend. You can at this stage take all the information on face value as the due diligence phase is designed to verify all figures and claims made.

You may also decide to do some market research but great care should be exercised not to disclose information that may compromise the Selling Business.

7) Extend and Offer to Purchase:

It is important for the Business Seller to receive an offer before the hard work and potentially expensive processes of Due Diligence and other processes can start. Such a written Offer to Purchase can take many forms such as a Heads of agreement, Offer to Purchase, Letter of Intent, expression of interest… but the objective is always to communicate in as much as possible detail:
– The price the Purchaser is going to pay
– The relevant terms of the agreement.
– The conditions and more specifically the suspensive conditions.
– The time line clearly defined.
– Handover and restraint arrangements.
The above are all important parameters to the Seller to decide if the offer meets his minimum “Sell my Business” criteria.
The importance of achieving this ‘in principal’ agreement on price and terms with the seller is that the business will now be taken off the market with no new buyers introduced to the seller.

8) Payment of Deposit:

It is normally extremely difficult to open the books of the business to a prospective Business Purchaser and disclose all forms of information including all the tricks of the trade without any form of tangible commitment from the Purchaser. The norm in transactions of this nature is that a refundable deposit of 10% of the Purchase price is placed in trust with a neutral attorney.

9) Due Diligence:

This is the opportunity the Purchaser has to investigate the financial position of the business as well as all other aspects of the business.
The Purchaser can decide to carry out the Due Diligence by himself if he has the skills and ability to do so or alternatively contract a specialist to assist. It is however highly recommended that the Purchaser sustain a high level of involvement as the due diligence not only necessarily cover financial aspects of the business but also systems, procedures, cultures, strategies amongst many others. It is perhaps the best learning opportunity about the business before a final decision should be made.
On conclusion of the Due Diligence it is required that the Purchaser confirm in writing the acceptance or failure of the DD investigation.

10) Other Suspensive Conditions:

The original offer might also have defined a number of other suspensive conditions such as financing, lease negotiations and others which can now follow the Due Diligence confirmation. Normally on conclusion of the Due Diligence exercise the Purchaser can now focus on all other conditions defined in the original Offer to Purchase.

11) Final Sales Agreement:

On successful conclusion of all suspensive conditions a final sales agreement can be negotiated and concluded by the Selling and Purchasing parties. Depending on the size of the transaction and its complexities the parties can either decide to make use of a simple sales agreement drawn up by the Business Brokers or contract independent attorneys.

The above is in no means intended to provide a detailed procedure to follow as there are many variables that can never be procedurised but the intention to provide the Buyer considering buying a business as a going concern a broad guideline how to make the process a lot easier.