Posted in Buyers Articles, Sellers Articles

In the business transaction world, it happens all the time. A deal between a buyer and seller seems to be headed to a happy closing table and then suddenly the deal is dead. What happened to kill the deal? More often than not, someone got some bad advice.

What kind of advice is bad advice?

When you are trying to buy or trying to sell a business, advice from anyone who has little to no experience with the process of buying and selling businesses is probably not going to be very productive. Here are a few examples:

A listing agreement (which gets your business listed on the market) includes protections for both the seller of the business and the business broker who makes the transaction happen. These agreements are fairly standard, and if you as a seller refuse to sign one, you are going to have a hard time trying to find a decent business broker to help you with your sale. These agreements are a legal document, so some sellers give the agreement to their lawyer (who has no business transaction experience) to look over before they sign it.

Another standard document (geared toward buyers) is the non-disclosure agreement (NDA). NDAs exist to protect the business itself during the transaction process as buyers are privy to the for-sale status of a business, confidential financial documentation and potentially proprietary information. The NDA is something you are going to have to sign if you want access to information about businesses on the market, and you’re going to have to sign one for each business you inquire about. Like the listing agreement, the NDA is fairly standard across the industry and is a legal document that some buyers will hand off to their lawyer before they sign it.

There is something essential about lawyers to point out here. Your attorney’s job is to make sure you are legally covered and completely free of any risk. As a business owner (or future business owner) you should already know that any business deal is going to come with a bit of risk – it’s the nature of the beast. So how do you reconcile the opinion of someone you have hired to protect you from any and all risk with a business transaction that may carry some risk on your part? The short answer is you don’t. If you give your attorney who helped you with your divorce or the one who helped you sue a contractor for negligence a business listing agreement, a NDA or for that matter any agreement you may become a party to during a business sale, they will likely tell you not to sign it, or only to sign it if they are allowed to make a lot of changes (which is likely out of the question).

What should you do then? Hire a business transaction attorney instead. A business-specific attorney will be able to advise you during your business sale because they have done it before and know what they are doing. They are already familiar with typical agreements, they know the ins and outs of the process, and will be a far better legal guide.

Another example of advice that can be counter-productive is advice from the CPA who usually does your taxes. Unless they have been a part of business transactions in the past, they are going to be a problem for the same reason that your regular attorney is – it is their job to cover you and you alone. The issue that arises with a CPA who is unfamiliar with business transactions is they may not understand the way businesses are evaluated and how they are priced. With many types of businesses, the value comes from more than just what shows up as black and white on a profit and loss statement. When you ask your regular CPA to take a look at the business you may end up with inaccurate advice. Instead, hire an accountant familiar with business transactions because their advice will be far more valuable.

What about advice from your friend’s brother-in-law who used to be a commercial real estate agent, from your neighbor who owned and sold a business 25 years ago, or from your good friend who’s a dentist? Listen to all of the advice you get, but remember to filter what you hear because professionals who do business transaction work for a living are probably best qualified to answer your questions. If unsolicited advice leaves you second guessing your choices in the transaction, by all means talk to your business broker, transaction attorney, and transaction CPA before you decide to back out of a deal. You don’t want to miss a great opportunity because you got terrible advice!

Have you been in a deal that fell apart because of bad advice? Share your experience here! Do you have more questions about the roles of business brokers, transaction attorneys or transaction CPAs? Please feel free to leave us any questions or comments – we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Posted in Buyers Articles, Sellers Articles

When a business is larger than a one-man shop, what the employees know about the sale of the business and when they know it are of major consideration and concern.

Keeping the employees in the dark is extremely important.

Breaches of confidentiality about a business and it’s for-sale status can cause massive issues.

There is a reasonable concern that once an entire staff knows the business is for sale, it will be impossible to keep that for-sale status confidential for any future time the business is on the market.

Employees may also jump ship. This usually occurs within the lower-level employees – think servers in a restaurant or clerks in a retail shop. The typical fear is a new owner will come in and clean house or that the business is for sale because it is closing the doors for good (rarely true).

What many sellers and their employees fail to realize is the jobs of critical staff (and maybe even the staff as a whole) are probably never safer than during the time frame when new ownership takes over. New owners need trained staff in place to keep the business up and running while they learn their new responsibilities.

My employees found out, now what? I don’t want to lose my whole staff.

If you are a seller whose employees somehow know the business is on the market (either intentionally or by confidentiality breach), make sure your employees know that you are expressing the importance of those employees to a new owner – this can greatly help to calm fears.

For the buyer of a business, meeting the staff before deciding whether or not to buy the business may seem necessary, but there are usually very few instances where this will be able to happen. Lower-level staff will likely have to be met after the deal is closed.

The employees a buyer will most likely be able to meet pre-closing will be key employees like managers and other staff members who are crucial to the operation and would be very difficult to replace. In most situations, the buyer will meet these employees only after all other aspects of due diligence have been satisfied and the deal is still moving forward. This protects the seller’s business from any damage that could be done by revealing the sale to the staff too soon.

The message here is that maintaining the confidentiality of the business sale will be paramount to the successful sale of the business, so both buyers and sellers will have to work together when it comes to the staff in order to keep everyone in place.

Are you a business seller who is concerned about your staff knowing the business is for sale? Are you a business buyer who feels they need to meet the staff before you get to the closing table? Please feel free to leave us a question or comment, and we will be happy to address any concerns you may have.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Posted in Become a Business Owner, Buyers Articles

We would all love to be our own boss, to be completely in charge of our own destiny. If entrepreneurship seems somehow out of reach, you should know there are easier paths to business ownership than coming up with a groundbreaking and inspired idea and building a successful and thriving business from the ground up. What follows are a few thoughts for the entrepreneur inside of you – waiting to succeed. 

You can skip the build-out and buy existing.

The inspired idea would be nice, but it’s not necessary – or the easiest path. Typically, buying a business is a safer bet than building one from scratch. You get to take over as owner of an already built-out location with trained employees and a proven set of operating procedures. This can be a fantastic first step into business ownership because it skips all the disadvantages a start-up will encounter, like establishing a customer base and building cash flow.

It is not, however, a fool-proof way to enter the world of business ownership. You need to choose a business that is profitable, or one that has easily-remedied issues that will make it profitable quickly (like customer service issues that could be handled by replacing some of the staff). You need to choose a business that has room for growth, and if it is a retail business, one with inventory that customers still want.

Look for something in your wheelhouse.

When you are beginning your foray into business ownership a big step is choosing the type of business you will buy. Be very careful with this step because it is where many new entrepreneurs get into hot water. DO NOT buy a business you know absolutely nothing about. If you are someone who has enjoyed the bar-scene for a long time, but you have never spent so much as a minute working in the bar/restaurant industry, then buying a bar is a terrible idea.

Look at industries where you have some knowledge or experience, as this familiarity will save you from complete disaster. Taking over a business for the first time is hard enough – you don’t want to add starting from scratch in a brand new industry to the equation.

Find the right help.

The smartest step any budding entrepreneur can make is to talk to an experienced business broker. That first conversation can tell you what your options are, help you figure out your next steps and get you launched on the path to business ownership. A broker will be an invaluable asset. They can help you find businesses that are right for you, be a buffer during the negotiations between you and the seller, assist you with licenses/permits, help you put together contracts – the list goes on and on.

The message here is if entrepreneurship is your goal, there’s really no reason you can’t start planning a way to reach that goal. Talk to a business broker today!

Are looking for help with finding the right business for you? Do you have questions about the business buying process? Ask us! Please feel free to leave us a comment or question, and we will be happy to help you on your journey to business ownership.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Posted in Business Broker Why & How, Buyers Articles, Sellers Articles

Business sales are inherently complex. There are many aspects of the process of buying or selling a business that can be very different from the buying and selling of anything else.

If you have bought or sold a home, for instance, the business sale process will seem very foreign. There is usually more money changing hands, more complex financial issues, commercial leases needing to be negotiated, licensing and permitting concerns – the list goes on. How does one navigate this complex process? You employ the services of a professional business broker.

What is a business broker?

They are sometimes also known as transaction brokers, meaning they represent the transaction itself. 

Typically each side of the deal will have their own broker, and both essentially represent their party’s part of the transaction instead of representing the people themselves. This is why it is possible to have one broker for both the buyer and seller side of a deal. If both parties can trust the broker involved, having only one person as a go-between can make negotiations less difficult. 

Why is the business broker representing the transaction itself a good thing?

When a lot of money is changing hands things can get out of control very quickly. Business deals are messy. If the deal starts to go south, as most do at some point in the process, the broker is there to protect the deal. This is different from what an attorney might do in the same situation – an attorney’s job is to protect their client from any and all risk. If business brokers were employed to do the same thing, prevent any and all risk, it would be impossible to get a deal to closing because all business dealings – business sales included – come with a fair amount of risk.

The broker or brokers representing the transaction is what gets deals done.

Having someone to keep the deal moving is truly helpful, but you should also be able to trust the broker or brokers involved. Your broker is there to help you navigate this incredibly complex process and to help you either successfully sell or successfully purchase the right business for you. A good broker will go the extra mile for their clients because your eventual success as a business owner or seller leads to your broker’s success within a healthy small business market. 

Are you thinking of buying or selling a business and want to know more about the role of a business broker in the process? Please leave us a question or comment here, and we will be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

No Comments »

Posted in Become a Business Owner, Business Broker Why & How, Buyers Articles

You’ve found a great business and are excited to start negotiations with the sellers – but here’s a thought you may not have considered. That’s not the only negotiating you’re going to have to do.

When you buy an existing business, you typically are not buying the physical space that the business occupies.

Most businesses come with a lease, and that lease comes with a landlord and/or property manager.

Most landlords accommodate transfers easily, but not all do. Deals can get hung up on the lease when the landlord refuses to grant the transfer or has decided to change the lease terms dramatically. They can also get hung up if you don’t start working on the transfer until the last minute. 

The most important thing you can do as a buyer is get your hands on a copy of the current lease as soon as possible, and then deal with any lease issues long before the day you are supposed to close your deal.

Once you have the lease, the language you would typically want to see is in the section of the lease that has to do with transfers or assignments of the lease. Does it say something along the lines of “any assignment will not be unreasonably withheld”? If it does, you are probably in good shape. This type of language means the landlord would have to come up with a very good reason to keep from transferring the lease to you.

Landlords, for the most part, are concerned with keeping a rental space filled and generating rental income. Some, however, are unwilling to reassign leases (at least initially).

This is a part of the business sale process where your business broker will be an invaluable asset. They can act as a buffer between you and a difficult landlord, and can help to negotiate your new lease or the reassignment of the old lease to keep the lease rates reasonable.

Another way to keep the lease from holding up your closing is to be forthcoming with your financial information when the landlord asks for it. Most landlords are going to want to see some kind of financial statement that proves you have the capital to keep the business open. It would be foolish for them to rent to a tenant who will be forced to close the business doors only a third of the way through the lease. Some landlords also want to see some kind of resume or work history to show you have the experience necessary to keep the business running and profitable.

You should also be aware that in some cases the rental rate will slightly increase from what the seller is currently paying when you get a new lease. You can negotiate a lease extension at the same rate, but eventually your new lease may come with a new rental rate. You will also be responsible for coming up with the deposits necessary for the lease.

The message here is your business won’t be much of a business if you can’t get a lease assigned to you for the space. Deal with lease issues early on and the won’t become a big headache in the end.

Are you a business buyer who has questions about business leases? Have you had a deal fall apart because of a difficult landlord? Please feel free to leave us a comment or question here, and we will be happy to assist you with any lease questions.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

No Comments »