Buy a Business
The Right Way to Buy a Business:
Welcome to the CNMI, we are here to guide you through this process. The best place to start is by looking at an industry with which you’re both familiar and which you understand. Think long and hard about the types of businesses you’re interested in and which best match your skills and experience. Also consider the size of business you are looking for, in terms of employees, number of locations and sales.
Next, pinpoint the geographical area where you want to own a business. As you are interested in the Northern Mariana Islands, you will find that there are some unique advantages to doing business here, as well as challenges. It is important to familiarize yourself with all aspects of your market. Assess labor pool and costs of doing business in that area, including wages and taxes, to make sure they’re acceptable to you. Once you’ve chosen a region and an industry to focus on, investigate every business in the area that meets your requirements.?
Contacting a business broker is a good way to find businesses for sale. Most brokers are hired by sellers to find buyers and help negotiate deals. If you hire a broker, he or she will charge you a commission–typically 5 to 10 percent of the purchase price. The assistance brokers can offer, especially for first-time buyers, is often worth the cost.?
- Prescreening businesses for you. Good brokers turn down many of the businesses they are asked to sell, whether because the seller won’t provide full financial disclosures or because the business is overpriced. Going through a broker helps you avoid these bad risks.
- Helping you pinpoint your interest. A good broker starts by finding out about your skills and interests, then helps you select the right business for you. With the help of a broker, you may discover that an industry you had never considered is the ideal one for you.
- Negotiating. The negotiating process is really when brokers earn their keep. They help both parties stay focused on the ultimate goal and smooth over any problems that may arise.
- Assisting with paperwork. Brokers know the latest laws and regulations affecting everything from licenses and permits to financing and escrow. They also know the most efficient ways to cut through red tape, which can slash months off the purchase process. Working with a broker reduces the risk that you’ll neglect some crucial form, fee or step in the process.
A Closer Look
Whether you use a broker or go it alone, you will definitely want to put together an “acquisition team”–your banker, accountant and attorney–to help you. These advisors are essential to what is called “due diligence”, which means reviewing and verifying all the relevant information about the business you are considering. When due diligence is done, you will know just what you are buying and from whom. The preliminary analysis starts with some basic questions. Why is this business for sale? What is the general perception of the industry and the particular business, and what is the outlook for the future? Does–or can–the business control enough market share to stay profitable? Are raw materials needed in abundant supply? How have the company’s product or service lines changed over time?
If the business still looks promising after your preliminary analysis, your acquisition team should start examining the business’s potential returns and its asking price. Whatever method you use to determine the fair market price of the business, your assessment of the business’s value should take into account such issues as the business’s financial health, its earnings history and its growth potential, as well as its intangible assets (for example, brand name and market position).
To get an idea of the company’s anticipated returns and future financial needs, ask the business owner and/or accountants to show you projected financial statements. Balance sheets, income statements, cash flow statements, footnotes and tax returns for the past three years are all key indicators of a business’s health. These documents will help you conduct a financial analysis that will spotlight any underlying problems and also provide a closer look at a wide range of less tangible information.
Lastly, don’t get discouraged! There are many great opportunities out there waiting. ?The important thing is to do your research and talk to people you can trust.
FOR CONFIDENTIALITY REASONS, TO GET MORE INFORMATION ABOUT BUSINESSES FOR SALE ON THE ISLAND, PLEASE CONTACT US.