Buying a Restaurant with No Chairs: Understanding the Purchase Agreement in a Business Sale



This is one of the many reasons why a buyer really needs to have their own business broker.

 

Let’s say you buy a restaurant on your own, sign the closing agreement, and arrive at your new restaurant only to discover that there isn’t a single chair or table in the whole place. A call to the seller reveals that the purchase agreement didn’t include the furnishings, so the seller packed them up and took them. Now you are stuck trying to refurnish a restaurant that you had assumed came as-is.

 

How do you avoid this scenario? Use a business broker.

 

Purchase agreements can be very complex, and if everything you’re expecting to get in the sale isn’t in the agreement, you could end up chair-less. Have your business broker go over your purchase agreement with you and ask lots of questions. You can never be too thorough when it comes to a legal document like a purchase agreement.

 

What about my attorney? Can’t I just have him look over a purchase agreement for me?

The short answer to this is no.

 

Only an attorney experienced with business transactions can really be of any help with a purchase agreement. We have seen countless deals fall apart at the last minute when an attorney with an entirely different specialty (like family law or labor law) looks over an agreement and tells their client not to sign off.

 

Business dealings of any kind always come with at least a bit of risk. Remember that the attorney that helped you with a lawsuit, for example, gets paid to keep you protected from any and all risk. A business broker is there to see that the deal goes through and that all parties have agreed to what is on the table.

 

This fundamental difference in responsibilities is what prevents your attorney from being of any real help during this process. You should employ the services of a business transaction attorney and a business broker instead, as they are more familiar with the process.

 

Have your business transaction attorney and your business broker go over with you what parts of the business will transfer to you and what parts will stay with the seller. Typically inventory, equipment and furnishings come with the business, but not always. You should also be clear about what contracts, client lists, etc. you will be inheriting.

Are you a business buyer who has questions about what assets and inventory come with a business when you buy it? Do you need help finding an experienced business transaction attorney and/or business broker? Please leave us a comment or question here, and we will be happy to help.

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


Should You Even Be On The Market? When A Business Seller Is REALLY Ready To Sell



It happens more often than it should. A business owner decides that they are ready to sell their business, and without another thought, lists the business on the market. They haven’t put any thought or energy into what makes a business sell, they just throw their business out there and hope that someone will come along and buy it.

 

What happens to these sellers? Their businesses never sell. Why? Selling a business is like selling anything else. It needs to be appealing to buyers. Getting your business to a place where it will be appealing to a buyer is vastly more important than just getting it listed. One step simply must be done before the other if you are looking to get top dollar for your business.

 

How do you make your business appealing to buyers? Step back and take an objective look at what you are offering.

 

  • What parts of your business do you hate? Are there systems in place that don’t really work, but you’ve been doing things that way for so long you barely notice? Think about the things that you dislike about your business and change them, because if you don’t like them, buyers won’t either.

 

  • If you were back at the first day you owned your business, what would you do differently? Implement those changes, if possible.

 

  • What skeletons are in the closet? What things would you try to hide from a potential buyer? You won’t be able to keep the skeletons from making an appearance during the due diligence phase, buyers will find out what you don’t want them to know. For example, if you are behind in your taxes, find a way to get them paid. These fixes now will keep deals from falling apart later.

 

  • Does your business look like a candidate for one of those makeover shows? The #1 complaint we get from prospective buyers about a business is “the place was dirty/falling apart/in need of renovation”. These cosmetic changes are important and can also be fairly simple. A fresh coat of paint, replacing a broken doorknob, etc. will go a long way in the first-impression department.

 

If you really want to sell your business, step back and take a look. As a business owner, you know what it takes to sell things. Use that same knowledge to put your business in the best light for buyers before you list your business on the market.

Are you a business seller who has questions about how to make your business more appealing to buyers? Do you need advice about which problems really need fixing? Please ask us! We will be happy to help you get your business ready for the market.

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


Business Broker 101: A Business Buyer’s Guide to Working With a Broker, Part 2: The Questions a Great Broker (Like Us) Will Ask You and Why



Every business buyer wants a great broker by their side during the business transaction process because it makes the whole process more successful overall. What you don’t want is a bad business broker who communicates only by email and infrequently at best. One easy way to judge whether or not you’ve found a good broker is to see what kinds of questions they are asking you. Let’s talk about the types of questions any good broker (like us) will ask you and why.

 

1. The Money

 

Your broker is going to ask you about your money. They need to know exactly how much money you have to invest in a business, and they are going to need to see some kind of financial statement to back up that number.

 

If you were planning on getting some kind of third-party financing, like a bank loan, don’t count on it. Although most lending institutions are beginning to change their attitude about lending after the economic collapse, it is still incredibly difficult to get third-party financing. If you have enough for a significant down payment, then you always have the option of finding a business whose seller is offering seller financing.

 

Either way, your broker will need to know the number on the bottom line. When you ultimately buy a business, you will have to share your financial information and prove the ability to pay what you’ve offered, as well as proving to a future landlord that you have the capital to keep the doors to the business open for the lease you are about to sign.

 

If you are someone who refuses to reveal this kind of information about yourself, you will have a hard time finding a good broker to work with you. It is also incredibly important that you be honest about your financial situation from the start. If you try to deceive the other parties in your transaction, the truth will ultimately come to light when you can’t write the check you’ve promised.

 

Be honest. Even if you will be using some kind of seller financing, you will need enough capital to qualify for a lease, and you will need to be forthcoming with that information.

 

2. Your Experience

 

Your broker will also want to discuss your experience with you and your experience within the industry that you wish to enter.

 

While it is not absolutely necessary to have owned the exact same type of business as the one you are seeking, you will need to have some practical experience with the type and size of business you are looking to buy. If you are currently a business owner, then you should look for a similar sized business or one that is modestly bigger. For example, if you currently own a small sandwich shop, it is probably not advisable for you to jump into a huge 250 seat restaurant and bar.

 

If you have never owned a business, you should have some practical experience or knowledge of your desired industry from working within that industry. The key here is to listen to the advice you are getting from someone (your broker) who has seen countless people buy a bar with zero restaurant industry experience only to end up running it into the ground.

A great broker doesn’t want to set you up to fail, they want you to succeed in the hopes that you will sell your successful business again down the road.

 

Your broker should have a discussion with you about your experience and help to guide you into a business that will actually work for you.

 

3. Your Expectations

 

A great broker will also be very interested in finding out what your expectations are with regard to the business you want to buy.

 

Are you looking for a business that has all of the numbers laid out in black and white on tax returns? Would you be willing to purchase a business whose income is more cash-based and what’s called “owner-to-prove”? How would you like the income to be derived for a business you own?

 

A great broker is not going to send you the past three years of tax returns and a current P&L (Profit & Loss statement) and leave you to figure out the rest for yourself. Businesses are generally very complex when it comes to determining what the numbers actually mean in terms of the return an owner gets on their investment. A good broker is going to walk you through the numbers so you get a really good idea of how the business is performing, as well as pointing out the areas where there is room for growth.

 

For example, a business may show a loss on paper, but when you add back in the salaries taken by owners, vehicles paid for by the business, etc., the business is actually quite profitable.

 

A great broker will also ask you about what you would ultimately like your work day to look like. How many hours are you looking to spend at your business a week? Are you looking for a major role, say as the head chef, or more of a managerial position?

 

These are important details when deciding what kind of business you are looking for, and a good broker will make sure your expectations align with the businesses you are considering.

 

The Bottom Line

 

We, as business brokers, are here to help you find a business that works for you. Finding and developing a good relationship with a great broker will be instrumental in your success finding and purchasing a business. If all you’ve done so far to vet brokers is shoot out a dozen emails, take the time to get a few brokers on the phone. Their questions will speak volumes about their ability to guide you through this process and reach your goals.

 

Are you a business buyer who hasn’t been asked any of these questions? Do you have questions of your own about what financial information you would need to buy a business, what industry would be right for you, or what your expectations should be? Ask us! Leave us a comment or question here, and we will be happy to help answer all of your business buying questions.

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


Business Broker 101: A Business Buyer’s Guide to Working With a Broker, Part 1: Why Do I Need a Business Broker?



When you enter the business market, you will come across a group of professionals called business brokers.

 

Who are they and what is their role on the buyer’s side of a business sale?

 

Business brokers represent the transaction, and it is their job to list and sell existing businesses. The broker typically works on commission, and that commission is typically paid by the seller.

 

While it might seem at first like only a business seller needs a broker – if you are on the buyer side of these transactions, then your own broker can be an invaluable resource.

 

Why?

 

A business broker can help you with every part of the business buying process. Buying a business can be a complicated and patience-testing endeavor. Having a professional to help you navigate this process will help you reach your ultimate goal of buying business.

 

Here’s why:

 

  • A good business broker will help you with deciding what kind of business would be right for you based on your goals and experience, and then help you find that business in the market. Using a broker will give you access to more listings than you would be able to find on your own, and may also give you access to businesses that are not yet on the open market.

 

  • A broker is a great buffer between you and the seller’s side of negotiations. In almost every case, the buyer and seller of a business will have to work together during a training period after the close of the sale. The more amicable you can keep your relationship the better that training period will be. The best way to keep things amicable between the two parties is to use an intermediary during the transaction process. Your own intermediary will be best for getting across the things that are important to you.

 

  • Having you own broker means you have someone who knows what your goals are, is familiar with what you are looking for in a business, and is concerned for your end of the deal. If you go into a deal where the seller’s broker is unknown to you, but they are going to represent both sides of the negotiations, can you really be certain that you will be getting a deal that works for you?

 

  • Buying a business means a lot of paperwork – like leases, licensing, and contracts. Having a broker to help you will ensure that you are getting all of the information you need and all of the proper paperwork handled.

 

The moral of the story is that you need your own business broker if you want to have a successful business buying experience. They will be invaluable in making your journey to business ownership a successful one.

 

Are you a business buyer who has questions about what a business broker can do for you? Please leave us a comment or question and we will be happy to assist you with your business buying questions.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


Bite the Bullet and Make an Offer: How Business Buyers Get Serious



When you are considering buying a business, many business buyers waste an inordinate amount of time beating around the bush. They spend countless hours searching business listings, calling multiple brokers, signing dozens and dozens of non-disclosure agreements only to never get to their ultimate goal of actually buying a business.

 

Business sellers and business brokers see these kinds of buyers all the time. While deep down this type of buyer might be serious about owning a business, they will not be taken seriously by those in the market or those in the industry because no one wants to waste valuable time on a buyer who is only “kicking tires”. As a buyer you have to show how serious you are about purchasing a business as soon as you have found the right business for you.

 

What if I am “kicking tires” because I’m not sure this is the business for me?

 

You will have to realize something about the business market right away – there is no perfect business. All businesses come with their fair share of issues, you will just have to decide what you will (and won’t) be able to deal with.

 

How do I find out if the business has issues I can deal with?

 

Make an offer. This is the best way to pull back the curtains and really decide if this is the business for you. In many cases, the seller will refuse to release any confidential financial information until an offer is made.

 

What happens after you’ve made an offer that is accepted by the seller is a period called due diligence. During due diligence, the business is temporarily pulled from the market to allow you as the buyer to have a good look at the financial records, the inventory, the equipment, etc.

 

If, during this due diligence period, you find out that the business has issues you can’t handle, has problems that you didn’t see from the outset, or you simply decide that the business is not for you – you can back out of the deal and move on.

 

As a buyer, you can’t be afraid to get the ball rolling. Make offers on businesses you are interested in. If a full-fledged offer makes you too nervous, you can even go in with a Letter of Intent (LOI). The point is the only way to be taken seriously by a seller is to put an offer in writing.

Are you a buyer in the market, but are having trouble getting sellers and brokers to take you seriously? Do you have questions about how to put in an offer on a business? Please leave us a comment or question here, and we will be happy to help.

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com



Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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




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