The importance of a well-written proposal

Max K. (his real name was changed to preserve the confidentiality of the client) found a business that suited him in all aspects.

After lengthy negotiations, the seller agreed to the offer, and they entered the contract.

Being extremely attentive to details, Max wanted to check the business thoroughly.

The first thing he did was download a checklist from the internet. This list was compiled to check several huge companies, so it consisted of eight pages written in small print. It took some time for him to realize that most of the items on this list were redundant. So, he had to spend several weeks negotiating with the seller on the real amount of information to be checked.

On the other hand, being circumspect, Max realized that he wasn`t good enough at specifics. Therefore, he hired a CPA (Certified Public Accountant), who was asked to conduct an audit of this business. The price of the audit was no less than $5,000, which was 3% of the transaction amount.

While Max was negotiating what would be checked, the CPA went on vacation. Finally, a contract was signed, and documents began to arrive, but there was no one to check them, and the documents were simply put in a file on a shelf in the office. The CPA said that he would begin the examination process two weeks later. Fortunately, the business owner extended the due date for the due diligence. However, this was the only good thing in this story.

The CPA wrote a page and a half report in which he simply recounted the tax reports of the business, without saying a word about real profitability. The CPA answered verbal questions that this kind of audit is much more expensive. Max wasn`t ready to pay tens of thousands of dollars.

Proposal writing process

The first thing to do is assess the real profitability of the business. Profitability depends on many factors. Firstly, the installment payments will diminish your income over several years. Secondly, the dynamics of sales may differ depending on the season. Also, spending on additional employees will reduce your income. Moreover, the cost of renting a license is deducted from the profit. And, of course, the cost of renting a space can significantly reduce profitability.

Based on the profitability, you need to draw up your budget, including the purchase of the business and payments during the first six months of ownership. You also need to decide on the maximum price that you are willing to pay.

The third thing to do is contact an immigration lawyer and get his opinion on the suitability of the business to secure an immigration petition.

Fourth, you should plan the due diligence. Make a list of specialists who will check financial documents, employee documents, the physical condition of the equipment, and so on. Read the article "Who checks the business" for more details.

Having compiled a list of performers, it is necessary to agree on the conditions and schedule of work before forming a proposal. You need to make sure that they will be available at the time of the audit. To do everything right, read the article on the due diligence schedule.

Only after that can you start writing the proposal.

Learn more about preparing an offer, the procedure and conditions for verification here.

You can learn how this is done from our Business Due Diligence class.

To draw up a proposal:

Последовательность действий при составлении предложения 3

  • Start as early as possible.
  • When inviting specialists, set a time frame for them before proposing.
  • Consult with your broker about what can be verified. Don`t rely on information from the internet.
  • Be a professional. If you don`t fit into the schedule, you need to negotiate this with the opposite side (before you overdo everything).

Read What Our Clients Say (Google Reviews)

  • Absolutely thrilled with my experience at Florida Buy and Sell and especially working with Alyona! She was professional, courteous, and incredibly knowledgeable, making my business buying transaction smooth and hassle-free. Their expertise and dedication to customer satisfaction really stand out in the industry. Highly recommend for anyone looking to buy or sell business with confidence. A true gem in Florida’s market!
  • I enjoyed working with Alyona Safonova as a business broker, and I cannot recommend her highly enough! Alyona is a true professional with a deep understanding of the market and a talent for finding the perfect match for her clients. She guided me through the entire process with expertise and patience, always available to answer my questions and address my concerns. Her dedication and hard work resulted in a successful sale that exceeded my expectations. If you're looking for a knowledgeable, reliable, and results-driven business broker, look no further than Alyona Safonova! 💼👍
  • I've been dealing with Florida Buy and Sell in my professional capacity as an immigration attorney assisting foreign individuals in buying businesses in the U.S. I can attest to the high degree of diligence displayed by Florida Buy and Sell in all business transactions I witnessed. My primary point of contact, broker Alyona Safonova, has always been responsive to my clients' inquiries and meticulously collected all financial documents necessary for the effective transaction.