Become a Business Owner Archives - Page 13 of 20

Published March 9, 2020

Buying a business is no small task, and many first-time buyers are initially intimidated by the paperwork required to make a sale happen.

The good news is the paperwork, contracts and red tape required for buying a business are totally do-able.

You just need to stay on top of requirements, have patience and have the right help.

The last (and possibly the most aggravating) part of the paperwork you will come across in a business transaction has to do with the licensing involved when starting or running a business.

A very important note on licensing – you absolutely must have all your licensing in place before you take over as owner of the business. Any procrastination on your part will probably lead to major issues. Any procrastination on your business broker’s part could also be a problem. Any good business broker should be helping their buyers wade through the paperwork jungle. Some brokers leave their clients high and dry, postponing important licensing issues until the last minute. Your broker should be helping you get the information necessary to get the proper licenses and permits. If they aren’t, you might need to find better help.

Your licensing requirements will depend on where the business is located, what goods or services it provides and your role in the business itself. For example, a small pizza shop that does not serve alcohol will have to comply with licensing requirements from the Division of Hotels and Restaurants but not the Department of Alcohol, Tobacco and Firearms. If you are buying a contracting business, you may need to have the appropriate contractor license for your state. Each state, county and city will also require specific licensing requirements depending on what the business is and where it is located in relation to state, county and city boundaries.

Just like all of the other paperwork requirements we have discussed in previous articles – this is a great example of when a business broker is worth their weight in gold. As we already mentioned, any good broker should be helping you with licensing requirements or referring you to a licensing professional. They should also be advising you on when each part of the licensing process should be started and when it needs to be complete.

If you don’t want to pay the fees of a licensing professional, you should know that it is absolutely possible to do your own licensing – but it will take a good dose of patience and plenty of perseverance.

The best advice is to get all of the necessary licensing information from the seller (through your broker) and then go through each licensing requirement one at a time. You should print all applications regardless of whether or not you will be submitting them online as many government agencies have time-out procedures on their websites (so if you take too long to fill out your application online it will time-out and you will have to start over). Printing the applications allows you to fill everything out beforehand so you don’t have timing issues. You should also have everything in printed form and kept together because in many cases an application will require approval and signatures from multiple agencies – so it is best to take everything with you.

You should also understand that all government agencies are very large bureaucracies, and as such the red tape involved can be extensive and open to interpretation. What do we mean by “open to interpretation”? If you have a question on one part of a specific application, you might call one day to get an answer. The next day, when you speak to someone else in the same office, you might get a completely different answer. Although frustrating, this difference in opinion is totally normal. Just follow the instructions of the government agent you are currently dealing with, and try to deal with that one specific person every time (not always possible).

The best way to deal with licensing? Ask questions, lean on the experience of your business broker and stay on top of deadlines.

Do you have more questions about the licensing requirements in a business sale? Would you like to know more about what’s included? Ask us! Feel free to leave any questions or comments 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

The Paperwork Series: The Commercial Lease For Business Buyers

Published March 2, 2020

Buying a business is no small task, and many first-time buyers are initially intimidated by the paperwork required to make a sale happen.

The good news is the paperwork, contracts and red tape required for buying a business are totally do-able.

You just need to stay on top of requirements, have patience and have the right help.

As you near your closing date, you will also be nearing the day when you sign your commercial lease. Almost all business transactions are for the business itself – not for the associated real estate, so in almost all cases you will be dealing with a commercial lease when you buy a business. The timing for signing your commercial lease will be one of the clauses mentioned in your purchase contract.

Navigating the negotiation of a commercial lease and acting as a buffer between buyers and typically difficult property managers is yet another example of why a good business broker is instrumental in the success of a sale.

Property managers are difficult by nature because it is their job to protect the owner of the property from anyone who might not be able to pay the rent. Businesses, especially small businesses, are inherently very risky – so many property managers are hesitant to allow new owners to take over the lease at a location. You should expect a thorough vetting process, and should be prepared to disclose your financial statements and your resume. Your new landlord wants to make sure you have the experience necessary to keep the business successful and the capital to pay the rent during the transition to new ownership.

The inherent risk of small business also means you should expect that your lease will be essentially the same price as the lease the current seller is paying. Most property managers are not going to renegotiate for a much lower price. Why not? Keeping the current tenants at their current rate means more money for the property owner, so be ready to pay essentially the same rent (if not more).

Commercial leases are similar to the purchase contract because they are very extensive. You should review them carefully with your business broker and your business transaction attorney. Just like your purchase contract, any attorney unfamiliar with the business transaction process will be hesitant to advise you to sign a commercial lease simply because it is so extensive. Listen to the advice of your business broker and your business transaction attorney as they are best suited to advise you in this situation. Also be aware that most commercial leases are fairly standard, so although you may be able to negotiate some small parts of your lease – it will largely stay as it was for the original tenant.

Do you have more questions about the commercial lease in a business sale? Would you like to know more about what’s included? Ask us! Feel free to leave any questions or comments 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

The Paperwork Series: The Purchase Contract For Business Buyers

Published February 24, 2020

Buying a business is no small task, and many first-time buyers are initially intimidated by the paperwork required to make a sale happen.

The good news is the paperwork, contracts and red tape required for buying a business are totally do-able.

You just need to stay on top of requirements, have patience and have the right help.

After you have signed non-disclosure agreements and have had a chance to check out a few businesses, the next set of paperwork you will encounter will be your purchase contract.

What is a purchase contract?

When you find a business you really like, you will put together an initial offer with your business broker and present that offer to the sellers. This initial offer opens up the negotiating table, and after a bit of back and forth between both parties you will hopefully have your amended offer accepted by the sellers.

Your initial offer, once accepted, essentially becomes the purchase contract. This contract is basically a guide for what will happen during the transaction process.

What will it include?

It will vary from transaction to transaction because businesses are inherently complex and each one is very different from the next. Some basic items the purchase contract will cover? The price offered, the length of the due diligence period and the length and scope of training are a few of the things covered in your contract, but there will also be many more.

The complexity of this agreement is one of the major reasons the professional help of an experienced and qualified business broker is necessary for a successful transaction. Drawing up a purchase contract on your own could leave you in a lurch if you forget something critical.

An important point about seeking professional help with your purchase contract: your business transaction attorney could also help you with the purchase contract – however, notice we said business transaction attorney. Your family law attorney or the attorney you used for a civil lawsuit are not going to understand a purchase contract the way a business transaction attorney would. Remember that an attorney’s sole purpose is to protect you from any and all risk – and all businesses come with an inherent amount of risk. This contradiction means it will be tough to properly advise you if your attorney has never been a part of a business transaction. The solution is to use the advice of a business transaction attorney and business broker instead.

Do you have more questions about the purchase contract in a business sale? Would you like to know more about what’s included? Ask us! Feel free to leave any questions or comments 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

The Paperwork Series: The NDA For Business Buyers

Published February 17, 2020

Buying a business is no small task, and many first-time buyers are initially intimidated by the paperwork required to make a sale happen.

The good news is the paperwork, contracts and red tape required for buying a business are totally do-able.

You just need to stay on top of requirements, have patience and have the right help.

We’ll start with the first paperwork you will come across, the non-disclosure agreement. This is an agreement you must sign in order to learn the name and physical location of a business that interests you.

Why do you have to sign it? When a seller puts their business on the market, the confidentiality of that for-sale status is crucial for protecting the business. When confidentiality is breached an entire staff can quit, vendors can cancel contracts and the competition may move in for the kill.

The non-disclosure agreement protects the confidentiality of the business by creating legal repercussions for a buyer who discloses the business inappropriately. You as a buyer can avoid these repercussions by keeping the information you are given to yourself and by following the instructions of your broker in regards to any financial documents or associated information you are given.

What if I don’t like a portion of the non-disclosure agreement? Can I cross out the portions I don’t like before I sign it? No, you can’t. Non-disclosure agreements are standard documents, and as such changes are not permitted.

If you are uncomfortable signing the non-disclosure, consider the reason it is needed. If you were selling your own business, you would want legal repercussions in place to protect that business. You wouldn’t be comfortable handing over sensitive and/or proprietary information to just anyone in that same way you probably wouldn’t be comfortable handing your personal tax return to the strange guy sitting next to you at a coffee shop.

You should discuss any reservations you have with your business broker, but understand that your refusal to sign a non-disclosure agreement will probably put a stop to your ability to buy a business.

Do you have more questions about the non-disclosure agreement and what it means for you as a buyer? Would you like to know more about the business buying process? Ask us! Please feel free to leave any questions or comments 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

Business Buyer Questions: What Can I Afford?

Published February 10, 2020

What can you afford?

This is an important question, but a vastly more important question is…

What can you REALISTICALLY afford?

Anyone around for the real estate crash of 2008 knows that a major contributor to that disaster was people buying homes they had no business buying. Great big loans were common, and eager home buyers leapt at the chance to buy dream homes that were well out of realistic reach.

While one would hope that we’ve all learned our lesson, there are many instances in the business market today where buyers make a 2008-esque mistake. They purchase a business they can’t realistically afford and guess what happens? Failure. Time and time again we’ve seen buyers bite off more than they can chew, use up all of their free capital and end up having to walk away six months after the closing table.

How do you protect yourself from this disaster?

Have a frank and honest conversation with your business broker when you start the business buying process. Your broker needs to know what funds you actually have available and what you are willing to risk. It should go without saying that you should be using as little of your free capital as possible for the purchase of your new business.

Why?

You are going to need cash available for a litany of things when you take over the helm. Payroll, inventory, licensing – there are day to day costs that will need to be paid in order for the business to continue running long enough for you to get profitable.

What we’re trying to drive home here is if you have $100,000 available – don’t look at $100,000 businesses. Look for businesses well below your max budget so you leave yourself some financial wiggle room in your early days as owner.

Are you currently looking for businesses to buy and want to know what you can realistically afford? Would you like to know more about how much free capital you should leave yourself? Ask us! Leave us any questions or comments 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

Want To See A Business On Vacation? PLAN AHEAD

Published February 6, 2020

It’s a request we get all. the. time. A prospective buyer has made a trip to our area, they’ve already been here a week and they would like an on-site tour of one of the businesses we have listed. Oh, and they fly back home tomorrow morning so the tour has to be now.

Guess what? It’s a hard no.

Why?

Business sales are nothing like home sales where you can make a call and someone can drive you around that day. Everyone knows when a home is for sale, and that knowledge of the home’s for-sale status is a good thing.

The opposite is true for existing businesses.

Business sales work under a tightly controlled layer of confidentiality. This confidentiality covers everything – from the tax returns to the very name and location of the business. A business that reveals it’s for-sale status can be setting itself up for potential ruin. Regular customers will (incorrectly) assume that a business for sale is a business on the brink of failure and take their business elsewhere. Staff can quit en masse to find more stable work. Competitors can move in for the kill. All bad things, right?

The necessity of confidentiality means that potential buyers must sign non-disclosure agreements before even the name and location of a business can be disclosed. They will likely need to arrange several conference calls with the seller and business brokers involved to decide if a business fits with their goals for business ownership. Then (and only then) does it make sense for a potential buyer to see the physical location of the business. This on-site tour will need to take place before or after business hours when no staff or customers will be on site, and will need to be coordinated between the schedules of the buyer, seller, brokers involved and the business itself. Guess what? That 100% can’t be done before your plane leaves tomorrow.

Do yourself and your chance for getting a look at a business a favor – plan ahead. Have the cursory conversations with your broker, the conference calls with sellers and the time and flexibility to arrange on-site meetings – way, way ahead of time.

Are you in the market to buy a business and want to know more about how confidentiality affects the process? Would you like to know what businesses in the area might meet your goals for business ownership? Ask us today! Leave any questions or comments 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

Future Entrepreneur? Why You Should Pretend That Unicorns Are Impossible

Published January 13, 2020

Pop culture mythology is full of entrepreneurial unicorns – these semi-urban myth creatures who start a tech company and 6 months later sell it for millions or billions of dollars. Many hopeful budding entrepreneurs see these news snippets and falsely believe that entrepreneurship, if done the “right” way, can make them fabulously wealthy in no time at all.

If you are considering a career as an entrepreneur, you will essentially doom yourself to failure if you think the world of business ownership is quick or easy. It just isn’t.

Believing you can enter business ownership and suddenly vault yourself into fabulous wealth is a dangerous way to enter a reality where hard work and perseverance are the only keys to success.

Want the cold, hard truth of entrepreneurial unicorn stories?

Owning a business is tough.

If you own a business, the buck stops with you. Even in a larger business with a management structure and many employees – you are ultimately responsible for the success or failure of your business. Business owners work long hours, can have high levels of stress and don’t always make tons of money (especially in the first few years). You need to accept that becoming the master of your own destiny by working for yourself means you need to have the drive and grit to get the job done.

You probably won’t get fabulously wealthy.

We all know the names of the entrepreneurial NFL quarterbacks like Zuckerberg and Jobs – but just like the chances of any high school football player making it to the starting lineup on Super Bowl Sunday, most entrepreneurs don’t become billionaires. This is not to say, however, that you wouldn’t make a good living owning your own business. If you work hard you can absolutely make a decent amount of money and have a good quality of life. Keeping yourself grounded in financial reality will keep you eye on the right goal – growing your business – instead of chasing an impossible scenario.

Owning a business can be very, very rewarding.

Even though entrepreneurship is tough and probably won’t make you a multimillionaire, the benefits and rewards of owning your own business make the journey completely worth the effort. Owning your own business means you get to be your own boss. It means every dollar you make, you’ve made for yourself and not someone else. It means you have the flexibility to set your own schedule. It means you get to be the master of your own destiny. It means you get to wake up every morning and do something your love to do. The benefits far outweigh the effort it takes. Just head into the world of business ownership firmly grounded with realistic (and non-unicorn) expectations and you have a far better chance of success.

Are you thinking about becoming a business owner and have questions about how much money you can make when you own a business? Would you like to know what types of businesses are currently for sale in your area? Ask us! Please feel free to leave us any 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

Big Mistakes: Don’t Sink Your New Business

Published January 6, 2020

Although unfortunate, it does happen. Business buyers get their hands on a profitable business and within six months they are calling us to sell because they are literally days away from complete and utter failure – like having to lock the doors and walk away.

How does this happen?

There are four big mistakes that can cause you to pull the rug right out from under your own feet, but they can easily be avoided if you know what they are and apply some common sense to your new venture.

Spending All Of Your Cash

You might have $100,000 to spend on a business, but that doesn’t mean that you should be shopping for businesses that are listed for $100,000. Buying a business and launching yourself into business ownership is an expensive adventure, and you will need to reserve enough of your capital to keep yourself in the black long enough to get the business generating a profit with you at the helm. You will need cash for licensing fees, for your new commercial lease, for inventory and payroll in your first few weeks as owner – only to name a few. When deciding what you can and can’t afford, be honest with your business broker about the money you have available and they can better assist you with finding a business that will reserve some of your cash.

Ignoring Red Tape

Yes, bureaucracy is annoying. Licensing requirements are confusing, expensive and time-consuming – but that doesn’t mean that you can skate around the requirements. You need to be sure that you are operating your business in accordance with the licensing requirements of your industry, state, county and city. If you aren’t, it is only a matter of time before you are caught – and the consequences can be devastating (think the loss of a liquor license or major fines and penalties, for example). Pay attention to the red tape.

Coasting Too Early (Or Ever)

You found a great little business, and from day one you were lucky enough to be pulling a profit, so you take your foot off the gas and let the business essentially run itself. This always ends in disaster. Think about why this business was great in the first place. The former owner worked incredibly hard to maintain what worked and continually focused on the future growth of the business. That simple formula, always maintaining and growing your business, is the key to success. Owners that stop trying always stop succeeding.

Changing Everything

You bought a profitable restaurant, but you hate everything about it. The decor is dated, the equipment isn’t the top of the line and the menu doesn’t appeal to your vision of restaurant ownership. You spend your first six months of ownership completely gutting the kitchen and dining room, a massively expensive renovation. Then you come up with an entirely new menu that is a huge divergence from what the restaurant used to serve. While you are at it, you also change vendors and essentially every operating procedure. After all of this massive upheaval, you are shocked that you can’t get customers in the door and that all of your staff jumped ship. Where did everybody go? The old phrase “if it ain’t broke, don’t fix it” goes a long way in explaining this most expensive of mistakes. The restaurant in this example was successful because it had a regular clientele who loved the menu and quaint decor and a happy staff who were good at their jobs. New owners who change things before they give themselves the time to understand why certain aspects of the business work (or why they don’t work) are setting themselves up for failure. A new owner is far better off following in the footsteps of the prior owner until they are sure the changes they want to make are changes that will actually improve the business, not hurt it.

If you are looking at businesses to buy – be aware that you need to be careful of too many changes, you need to keep the business growing, you need to stay on top of red-tape issues and you need to be careful with your cash if you want to be successful.

Are you in the business market and are curious about what businesses you could afford with the cash you have available? Do you have more questions about how to avoid the pitfalls we talked about here? Ask us! Leave any questions or comments 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

4 Considerations – Buying A Franchise Vs. Buying Independent

Published December 30, 2019

If you are thinking about buying a business, then one of the many early decisions you will have to make is whether you should buy an independently owned small business or a franchise.

Both routes to business ownership can bring a buyer success, but it will be a matter of personal choice as to which path will be better suited for you.

Let’s take a look at the four major differences between an independent small business and a franchise to help you decide which camp will suit you best.

Branding

If you decide to go it alone and opt for an independently owned small business, you will most likely be going without the large-scale name recognition and branding that are associated with a large franchise. This can be detrimental in that a strong brand will automatically bring you customers loyal to the parent brand without having to try very hard. On the flip side of the branding coin, however, are the problems that can arise if the parent company or another franchisee makes a big negative splash in the media. Any of that bad press will automatically fall onto anyone within the franchise group.

If you are a marketing machine and love to create buzz about your business, then perhaps an independent business is for you. If you would rather focus your energy elsewhere and leave the branding to the parent company professionals, then a franchise would be a good choice.

Ownership

Yes, a franchisee owns their business in the same way that an independent owner does – the difference lies in the decision making abilities of these two owners. If you are part of a franchise then decisions on product choices, renovation decisions and operating procedures may be made for you.

If you are a first-time business buyer, this might be a good bet because you don’t have to make every decision right away. If you are a complete control freak by nature, you might have issues with having the parent company tell you what to do.

Total Cost

Although debatable and entirely dependent on each individual business and each individual franchise, there are a few generalizations about cost that you can use to help with your decision about becoming a franchisee.

In general, the upfront costs for buying a franchise can be a bit lower than buying an independently owned business, but in return the independent business owner has more control over their cash flow than a franchisee would. For instance, a franchise can require a renovation and you would have to comply where an independent owner can delay renovations until the cash is more readily available.

Operations

This one is also helpful for a first-time business buyer. If you opt for the franchise route, then the day-to-day operations of your business will be established and tested. You will not, however, be able to make major changes to the standard operating procedures if one or more parts don’t suit the way you like to run your business.

Buying an existing independent small business also means that you inherit a set of operating procedures – the difference is that these procedures are not so set in stone. As you learn the ins and outs of running your new business, you can make any changes you see as necessary.

If you are considering a franchise over an independent business or vice versa – the best thing to do is have a chat with a business broker experienced with both franchise and independently owned businesses. Using your experience and your goals for business ownership you and your broker will be able to sort out which option would be best for you.

Are you considering a franchise and have more questions about what it would mean to be a franchisee? Do you think an independently owned small business would be better for you and want to know what businesses are currently available? 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

The Garage Start Up? Why Buying A Business Is Better

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

Published December 2, 2019

When you think about famous entrepreneurs, it often brings thoughts of a person who came up with an inspired idea and built a successful and thriving business from the ground up – with the romantic twist of doing so out of a garage with little to no seed money. While this may be the path for a few very driven and lucky individuals, the path for most entrepreneurs begins quite differently, with the purchase of an existing business.

Wait, what? Buy an already existing business? Why would I do that instead of starting my own business?

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 and proven location with trained employees and a ready-to-go set of operating procedures. This can be a great way to get into business ownership because it skips all of the disadvantages a start-up will encounter – like establishing a customer base, building cash flow, paying for build-outs, establishing marketing practices, training a brand-new staff, obtaining initial permits and licenses – to name just a few.

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. You need to choose a business that will fit with your goals for business ownership and one where you have some practical knowledge or experience. You also need to choose a business that has room for growth.

I have a lot of questions, who should I ask?

The smartest step any budding entrepreneur can make is to hire an experienced and qualified business broker. A broker will be a great asset, as they can help you find businesses that are right for you.

In your initial conversation with your broker you should talk about your previous work experience. You don’t want to have to learn a whole new industry at the same time you are learning how to operate a business. You should also talk about your goals for business ownership. Your goals will determine what industries would be best for you. For instance, buying a bar with the goal of having evenings off isn’t going to work. Be a bit opened minded about the businesses that are available – you might be surprised to find a business that perfectly fits your goals in an industry you would never have thought of on your own.

The message here is entrepreneurship isn’t an impossible goal, and you don’t have to come up with a genius idea in your garage to get there. There are a myriad of businesses available everyday, and with help from a good business broker you can find the right one for you.

Have you always wanted to own your own business, but were unsure of where to start? Do you have questions about what a business broker does? Ask us! Leave any questions or comments here, we would be happy to help.

Michael Monnot

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