Frequently Asked Questions About Buying A Business in Hawaii
> Back to Key Questions
Thank you for visiting VR Mergers & Acquisitions, Hawaii's largest and most professional business broker. We're committed to help you find the business of your dreams in paradise. On this page we answer the most Frequently Asked Questions (FAQ) we receive about buying a business in general and in Hawaii in particular.
Click on any question to be taken to its answer.
Q: Why should I own a business?
Q: Why own a business in Hawaii?
Q: What are the three options for owning a business?
Q: Why work with a business broker?
Q: How should I choose a intermediary?
Q: Will you represent us as buyer agent for opportunities held by other intermediaries?
Q: How do I search the opportunities?
Q: How can I find out about the newest business opportunities in Hawaii?
Q: How and where can I specify precisely the profile of the Hawaii business I want?
Q: Most business intermediaries don't seem to be very responsive. Why?
Q: The business profiles on your web site seem incomplete. How do I get more information?
Q: What information is typically considered confidential?
Q: Why do I need to sign your Non Disclosure Agreement to receive confidential information?
Q: Why can't you at least tell me the address or general of the business without the NDA?
Q: Why doesn't one NDA cover all the business opportunities?
Q: Can my intermediary sign the NDA for me?
Q: When do I get to see the financials and/or tax returns?
Q: Why are sellers or intermediaries resisting my due diligence data requests?
Q: What are the most profitable businesses in Hawaii?
Q: What are the most common sources of funds for buying a business?
Q: What are the requirements for bank/ SBA financing of a business purchase?
Q: What are the most common ways buyer verify financials?
Q: Does VR Mergers & Acquisitions audit its sellers' financials and verify their claims?
Q: Why should I own a business?
- Be your own boss
- Set your own hours
- Choose the type of work and clients you want
- Work for your own wealth, not someone else's
- Gain control over your career and destiny
- Reduce your taxes! Write off your car, computers, health insurance, travel, cell phone, etc.
Q: Why own or buy a business in Hawaii?
- High paying jobs in Hawaii are hard to find
- Strong economy and low unemployment
- Many Hawaii Business Opportunities and Franchise Opportunities
- Visit Hawaii Department of Business, Economic Development and Tourism (DBEDT) for more information
- Pleasant weather year round
- Friendly people… laid back lifestyle... the spirit of aloha
- Spectacular scenic beauty and nature
- Non-stop outdoor and sporting activities
- Read more about life in Hawaii here
Q: What are the three options for owning a business in Hawaii?
- Start your own business
- Open a new franchise outlet
- Buy an established business for sale in Hawaii
Q: Why work with a Hawaii business broker?
- It's free, unless you engage us for a retained proactive search! Most business intermediaries are paid by sellers; a intermediary's time & expertise are free to you
- Save time; a intermediary will help you find businesses that meet your needs
- For sale by owner businesses are of a much lower quality, on average, than intermediary listed businesses opportunities Hawaii
- We are in constant contacts with owners who want to sell a Hawaii business
Q: How should I choose a intermediary?
See suggested criteria in the table below.
| Criterion |
Why It's Important |
| |
| Specializes in Hawaii business sales |
Expertise is very different from commercial or residential real estate
|
| |
| Has access to at least 100 Hawaii business opportunities |
To ensure you have a broad choice
|
| |
| Does not charge buyers any fee |
One or two business intermediaries in Hawaii charges buyers significant fees
|
| |
| Professional, well trained and solid business experience |
To help you make the right decision |
| |
| Provides outstanding service |
Buying a business is complex and demanding |
| |
| Good personal fit |
Life's too short otherwise |
| |
Q: Will you represent us as buyer agent for opportunities held by other intermediaries?
Absolutely. We'll be happy to represent you, and there is no cost to you for our services.
Q: How do I search your opportunities?
- You can search through our business for sale opportunities by industry or island via the search box in the upper left hand corner.
- To search by keyword, just type "CTRL+F" in your browser, and a keyword search tool will pop up
Q: How can I find out about the newest business opportunities in Hawaii?
Subscribe to the VR Hawaii's twice monthly new opportunity newsletter. We will notify you of our new opportunities and of dozens of other intermediaries in Hawaii. To subscribe, email
and just say "subscribe" anywhere in the email.
Your privacy is certain. We will never intermediary, rent, or share your e-mail address to anyone. You will also be able to unsubscribe at any time.
Q: How and where can I specify precisely the profile of the Hawaii business I want?
We have a new web site specifically designed for this purpose:
http://www.vrhi.com/buying_a_business/registration.aspx.
Q: Most business intermediaries don't seem to be very responsive. Why is that?
There are two possible explanations:
- The individuals you've been dealing with are either too busy, disorganized, or generally unresponsive, or
- You have not demonstrated sufficient commitment, qualifications and/or motivation to justify more of their time.
The solution for the first issue is clear: find another intermediary to work with you. The second issue may sound harsh or surprise you. It might be natural to assume that every intermediary would be jump in response to any buyer that inquires on a opportunity. That is neither possible nor advisable.
The reality is that business intermediaries with a healthy inventory of opportunities are flooded with inquiries from buyers, 85% of whom will never buy anything.
The 85% are dreamers, not buyers. If a intermediary spends lots of time with every prospective buyer who inquires, s/he will either need to work 24 hours a day to keep up or starve. Every successful business broker must triage his or her time to focus on only committed, qualified and motivated buyers.
Q: The business profiles on your web site seem incomplete. How do I get more information?
Every one of our opportunities has two profiles:
- A public profile, shown on the web site, which provides a general overview of the industry, sales and profits, etc. but does not reveal the identity of the business, the location, detailed financials or other confidential information
- A full Confidential Business Profile. This has all the details on the business, including confidential information. To obtain this, you need to sign a Non Disclosure Agreement (NDA).
Q: What information is typically considered confidential?
- The name of the business
- Its location
- Anything else that could be used to specifically identify the business
- The financials
- Sensitive information about its markets, customers, suppliers, employees, contracts, operations, growth plans, etc.
- The reason for sale
Q: Why do I need to sign your Non Disclosure Agreement to receive confidential information?
Every reputable and experienced business broker will require you to sign a Non Disclosure Agreement (NDA) before releasing confidential information about a business opportunity. Why?
- Mere rumors that a business is for sale can be damaging to a business
- Customers, employees, and suppliers may all get nervous and seek changes and/or protection in their relationship with the business
- Some of the confidential information could be used opportunistically to compete with the business
- We have promised our sellers what we will have all buyers sign our NDA before releasing confidential information about their businesses
In our experience, if a buyer is not willing to take the few minutes required to complete, sign and fax an NDA, then s/he is not serious about buying a business and/or doesn't understand or respect the potential damage to a business from unwanted disclosure of confidential information. For these reasons, we can not and will not waive our requirement that all buyers sign NDAs before receiving confidential information about any of our opportunities.
Q: Why can't you at least tell me the address or general location of the business without the NDA?
Depending on how many businesses there are in its industry, the general location may be enough information to uniquely identify the business.
Q: Why doesn't one NDA cover all the business opportunities?
Our non disclosure forms do not apply globally to all our opportunities, but are rather specific to the named opportunity(s) on the form. We know this is inconvenient, but unfortunately our Hawaii attorneys tell us this is necessary to protect both seller and buyer. An NDA becomes unenforceable when it is too broad, and with 70 opportunities (& growing) throughout Hawaii, an NDA for all our opportunities would be way too broad.
Q: Can my intermediary sign the NDA for me?
No. Prospective buyers, NOT their intermediaries, accountants, attorneys, etc. must complete the NDA. If you wish to share confidential information about the business with your advisors you should provide a copy of the NDA to those advisors so they understand its terms.
Q: When do I get to see the financials and/or tax returns?
The table below summarizes our general policy for sharing financials. Note that individual sellers often modify this policy depending on their sensitivity, or lack thereof, on this matter.
| Process Step |
Financials Shared |
| |
| On the Internet; in public |
Total gross sales and seller's discretionary earnings for most recent full year |
| |
| After buyer signs NDA |
A fairly detailed income statement for last 1-3 years, and the latest available balance sheet |
| |
| After buyer tours the business, provides his/her own financials, credit report and/or resume |
Complete financials and possibly tax returns, depending on seller sensitivity |
| |
| After offer has been signed by buyer and seller |
Any reasonable financials desired by buyer |
| |
Q: Why are sellers or intermediaries resisting my due diligence data requests?
We often receive due diligence data requests from buyers that ask for: a) an unreasonable quantity of information that would take many hours to compile, b) information that is extremely confidential and/or could be used compete against the seller (e.g., a list of all clients), c) information that is excessively detailed and/or irrelevant (list of all board meeting notes, copies of all software manuals), d) some combination of the above too early in the process (e.g., copies of 3 years bank statements before buyer has submitted an offer).
It is customary that requests for information that is highly confidential/ sensitive (e.g, client lists, bank statements) and/or very time consuming to gather are deferred until after the buyer has made an offer and an agreement on price and terms has been reached. Otherwise, the seller could spend countless hours gathering data for and revealing confidential trade secrets to dozens of prospective buyers who have no intention of paying anywhere near what the seller is willing to accept. That would be a waste of buyer's and seller's time and damaging to the business.
If you want to see highly confidential or labor intensive information you must first submit your best offer contingent upon seller being able to prove his advertised earnings and other claims. If the seller accepts, s/he will need to provide any reasonable documentation you require to prove his/ her claims. If s/he can not provide satisfactory proof, you can get out of the deal at absolutely no cost. Our standard offer to purchase form provides ample protection for a buyer to get out of a deal if the seller can not prove his/ her claims about the business. We can refer you to a Hawaii accountant to assist with your due diligence.
Q: What are the most profitable businesses in Hawaii?
The most profitable businesses in Hawaii tend to have three or more of the following traits:
- Industry characteristics
- High barriers to entry
- Growing rapidly
- Unglamorous
- Company traits
- Highly differentiated products or services
- Dominates its niche
- Properly capitalized
- Adapts to Hawaii's unique market
- Attracts and retains the best people
For a more in depth discussion of this topic, download the "
small business strategy" article we wrote for the Pacific Business News.
Q: What are the most common sources of funds for buying a Maui, Kauai, Big Island or Oahu business?
In approximate order of usage:
- Cash, bank accounts, stock, bonds, CDs, and other highly liquid investments
- Home equity
- Seller financing
- Business/ asset sales
- Friends and family
- IRAs, 401Ks and other retirement accounts (we can show you how to tap this source)
- Bank loans (fewer than 20% of deals)
- Investment groups/ funds
Q: What are the requirements for bank/ SBA financing of a Hawaii business purchase?
First, it's worth noting that it's a common misperception that bank financing for business acquisition is readily available. Fewer than 10-20% of business acquisitions nationwide involve bank financing.
For a given acquisition to qualify for bank financing, three elements must generally be met:
- The business must have at least 3 years of solid profits proven on tax returns
- The buyer must have good credit (650 minimum FICO, preferably 700+) and strong experience in the industry (e.g., prior ownership or senior management positions)
- The deal must be structured with a minimum 20% down payment from the buyer and priced such that debt service will be less than 30% of discretionary earnings.
Q: What are the most common ways buyer verify financials?
- Tax returns
- Bank statements
- State sales tax (GE) reports
- Observation period, in which you sit in the business for a period of time and observe how much cash is coming in
Sellers willingness to provide the above information varies. Some have no hesitation. Others may first want to see if an agreement on terms can be reached, on the assumption the financials are provable, before releasing sensitive financial data. A good CPA can help you understand how to verify financials. We have CPAs we can recommend.
Q: Does VR Mergers & Acquisitions, Hawaii office audit its sellers' financials and verify their claims?
No. In fact, there's not a single business broker in the country who does. The cost of formal audits can run in the tens of thousands of dollars. With rare exception, only public companies have audited financials. You will need to investigate and verify seller's claims as part of your due diligence.
