The Right Advice At The Right Time: The Role Of Attorneys In Your Business Transaction

Let’s start this one off by saying we are absolutely not advocating an attorney-free business deal. A business transaction involves contracts that you will need to sign and a lot of money changing hands – so the assistance of an attorney is absolutely necessary.

 

 

Business transactions, however, are also inherently very complex and businesses themselves involve a decent amount of risk. If buying a business gave you a 100% chance of getting a fabulous return on your investment then that’s what everyone would do. Buying and running a business means a fair share of risk and plenty of hard work.

 

Before you bring your attorney into the mix (which you will definitely need to do), ask yourself this important question – what do they do for a living? They protect you from any and all risk.

 

It is impossible for your attorney to keep you from any and all risk and also give you a thumbs up on a business. It is because of this conflict between what a lawyer does for a living and what you are trying to do (buy or sell a business) that we are suggesting that you keep their advice to only the portions of your deal that they specialize in.

 

What do we mean by this?

 

Your attorney doesn’t need to be giving you advice about price. Determining what a business is worth in the current market isn’t what they do. They don’t know how to derive value from cash flow or how to price a business based on what comparable businesses have actually sold for.

 

Your attorney shouldn’t have a major role in negotiations. At the end of the day, a deal is happening between the buyer and the seller. These two parties will have a tough time coming to a consensus – even when using intermediaries like business brokers who act as buffers. Adding more voices and opinions to the mix by having attorneys intimately entwined in the negotiations might mean no deal will ever be reached. It becomes a “too many cooks in the kitchen” scenario.

 

I get why my attorney might cause problems, so what should I use them for?

 

Again, your attorney will be instrumental in putting together contracts and advising you of your risks in association with these contracts. You should absolutely listen to what they have to say in regards to these parts of a business transaction that are very much their specialty. You should listen to their advice, weigh what they have to say based on the fact that their job is to protect you from risk – and then use common sense to make up your own mind about what you should do.

 

A note here. You should also be using a business transaction attorney for this role. Your family law attorney (for example) isn’t going to understand your business contracts the way a business transaction attorney does. It would be like going to the pediatrician to get plastic surgery – it isn’t what they do. Finding and using a business transaction attorney with some experience in this very unique process will be pivotal to success.

 

Keeping a business transaction as simple as possible is the only way to successfully navigate a process that is inherently complex. Use each advisor for the role where their advice is the most appropriate and you will have a far better chance of transaction success.

 

Are you a buyer or seller who wants to have their attorney involved in everything? Do you have more questions about why this might be a problem? Ask us! Leave any comments or questions here and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

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All The Way To The Finish Line – Why You Need A Great Broker

 

Both parties have agreed on the purchase contract, you’re finished – right?

 

Not quite, and if you have a business broker who isn’t going to push your deal all the way to the finish line – then your deal could be in trouble. 

 

A contract does not mean the deal is done, it just means one step in the process has been completed. We have a very high closure rate once our deals get to contract – 70-80%, but most business brokers can’t get anywhere near that number.

 

Why?

 

Once the contract piece of the puzzle is done, many brokers walk away and let the deal fend for itself. They let things like licensing, SBA loan issues and follow-thru with details fall by the wayside – and when this happens a minor issue can become a major deal-breaker in no time.

 

A transaction isn’t closed until it’s closed.

 

Why would any broker let this happen? Once the contract is put together, most brokers think that their work is done, but the last few details are often the most important. Our process is different because we do an immense amount of pre-due diligence. We have all of the ducks in a row and have rooted out and dealt with many of the issues that come up at the end long before they become potential deal killers. Then, we don’t stop until the deal is done.

 

Let’s focus on just one of the often-overlooked last-minute details to give you an example of the importance of getting all those final ducks in a row:

 

If you as a buyer have no idea what the licensing requirements are for the business you are about to take over, how can you possibly have all of those requirements complete on the day you get handed the keys? Any business transaction means that at the very least all licensing must be transferred from the old owner to the new, and many of these licenses come with an inspection requirement that needs to be fulfilled before the business can serve customers. What does that mean if you don’t complete the necessary applications and inspections before the day you take over? You can’t open the doors until they are all complete, so having a broker who is on top of issues like licensing will be crucial for a successful transaction.

 

If you are a seller who offered seller financing, then it is in your best interest for the transition to the new owner to go smoothly. An incomplete licensing, permitting or inspection requirement will put the transition and the future of the business in jeopardy (meaning you won’t be able to get paid). Having a broker who is proactive on the licensing front (and all other fronts, for that matter) will mean a more successful transition to the new ownership and a far better chance for the new owner to find success right out of the gate.

 

Ask your broker how many of their deals make it to closing once the contract step has been reached. Their answer to this question will tell you all you need to know about their follow-through and whether or not you’ll be able to make it to the closing table.

 

Are you buying a business and want to know more about the process to transfer licenses? Are you selling your business and would like to know what aspects of your transaction will need to be followed all the way to the end? Please feel free to leave any questions or comments and we will be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

 

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Bad Advice: The Outrageous Listing Price

 

You’ve decided to sell your business, so you start asking the people around you what they think it’s worth. Your father-in-law, your CPA and your neighbor will probably give you vastly different numbers – and you’ve also got a rough calculation in your head of how much money it has cost you over the years to build the business into what it is today. Are any of these “valuations” correct? Probably not.

 

The hard truth of the business market is your business is only worth what someone is willing to pay for it.

 

Many, many sellers have a hard time with this concept – and unfortunately there are business brokers out there who will tell a potential client anything they want to hear in order to get the listingmeaning their bad advice will cause you to list your small business for an outrageous price that you will never, ever get.

 

The price you put on your business from day one is very important. A business that is priced correctly will tell buyers you are serious about selling (and that you aren’t totally insane). 

 

Your business should not be listed for a price that is based on how much money you’ve invested over the years, how much all of the equipment and furnishings cost you when they were new (8 years ago) or how much you think you’re going to need in order to retire with the quality of life you currently have.

 

Your listing price will contain a lot of moving parts, but primarily it should be based on cash flow, the current value of any assets and what comparable businesses have actually sold for.

 

There are some occasions where a standardized multiple is used, but every small business is a unique case, and should be priced accordingly.

 

What should you do? Have a serious conversation with your business broker about where you would like to set the listing price and then listen to what they have to say. If they think you’re way above where you need to be, you should seriously consider their advice before demanding they list for whatever you want. Any good broker is going to walk away from a client who demands an outrageous price. A broker who will bend to your demands (regardless of reality) should be avoided. 

 

 

Are you thinking about selling and are curious about what similar businesses have recently sold for? Would you like to know our thoughts on the current state of the market for your industry? Ask us! Please feel free to leave comments or questions and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

 

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Looking To Buy? An Essential Business Might Be For You

 

It’s something that we’ve discussed in these articles many times – the need to base the decision of what business would be right for you not on aesthetics, but on whether or not the business meets your goals for business ownership. Many of us have a picture in our head of what our ideal business would look like, but that doesn’t mean that type of business is going to be a good choice.  

 

Now that we are all living in the pandemic-led business climate – that picture in your head may need to shift.

 

Shift to what? An essential business.  

 

Our current reality has thrown a bright spotlight on those businesses that are essential for everyone – to eat, maintain basic hygiene, get adequate medical care, protect themselves, etc. What does this mean to you if you’re a business buyer? That perhaps a wise choice for business ownership is a business that everyone needs. Delivery services, food and beverage based retail, online shopping and the manufacturing of supplies are all good avenues right now.

 

The ability to pivot in times like these is often the difference between success and failure. Although you may have had your heart set on a particular type of business, reality might mean you need to shift your business choice based on achieving your business ownership goals – instead of chasing the picture you had in your head.

 

This doesn’t mean you can’t buy your dream business. It does mean you need to reevaluate why that business was your dream business in the first place.

 

Were you considering that type of business because it seemed like a fun lifestyle? The perceived lifestyle of a business owner is often drastically different from reality – so ask yourself what about that perceived lifestyle is so appealing? Is it the ability to set your own hours? Is it the ability to work from home? Is it the amount of money you will be able to make? Again, what are you hoping to get out of business ownership? The answer to that question might point you in a direction you hadn’t considered – and the smart buy would be an essential business in that direction that meets your goals.

 

What if the business I’m considering isn’t currently functioning as an essential business, but could be? As the new owner you can absolutely implement your own ideas that can both help your local community and keep your business in good shape.

 

Are you looking at buying a cafe? Perhaps you could implement a drive-up system for take-out or hire a temporary delivery driver. Are you looking at a retail store? Stock the items that people currently need and offer curb-side pickup and/or delivery as well. Are you considering a manufacturing business? What does the local economy currently need? Could you divert some of your resources to fulfill that current need? You get the idea.

 

As a soon-to-be small business owner you need to be thinking about how to keep your new venture in the black in these unprecedented times. Creativity and the willingness to pivot when a sudden shift is needed will likely mean the difference between success and failure in the new normal. The same attributes will also mean a possible reevaluation of your prospective business choices.

 

Are you considering buying a business but aren’t sure now is the right time? Does the current situation have you thinking an essential business might be right for you? Please feel free to contact us today. We would be happy to help you make the best decision for you. Leave us any questions or comments!

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

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Child Of An Entrepreneur? How To Follow Your Own Path

 

If you are the child of an entrepreneur, then you probably grew up in the family business. You might have napped in the back office and done your homework at your parent’s desk. Your chores might have included taking out the trash or washing dishes. Now that you are an adult, your parents might assume that your path in life includes taking over that family business so they can retire.

 

What if that’s not what you want?

 

You aren’t alone. Not everyone follows in their parents footsteps, and if you’ve found a separate passion along the way that you want to pursue, you should. The key to a happy life is doing something that you love, and (hopefully) with some discussion your parents will see things the same way.

 

There’s no way my parents are going to be okay with me doing anything else. Now what?

 

First of all, have you even asked? Any family with a family business needs to have a discussion about the future of the business and the possible succession to the next generation. If you haven’t had this discussion yet, no time is better than right now.

 

If you really don’t want to take over the family business, and your parents are counting on just that – there is a solution where both sides win.

 

Approach your parents with the idea of selling the business and then using some of the proceeds to buy a business that you can be passionate about, thereby preserving the entrepreneurial legacy of the family while at the same time pursuing your own dreams.

 

By selling their business they can also get a financial return on their investment of time, energy and money while simultaneously helping you on your own journey to business success. If they see that they can potentially both make some money and give you the key to your own happiness – what parent isn’t going to want that?

 

Start the conversation now, then talk to an experienced and qualified business broker (like us) about what comparable businesses have recently sold for – and what businesses currently on the market might meet with your goals for business ownership.

 

Are you the child in a family business and want to know what comparable businesses have sold for? Do you have questions about what type of business you could buy? Please feel free to leave comments or questions here and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

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Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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