Too Many Fingers In The Pie: Why Buyers And Sellers Need To Understand The Role Of Lawyers In Business Deals



 

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 return on your investment then that’s what everyone would do. This 100% scenario is, of course, far from reality. Buying and running a business means a fair share of risk and hard work.

 

What do lawyers do for a living? They protect their clients from any and all risk. See how your lawyer and a business transaction can never really agree with one another?

 

It is absolutely impossible for your attorney to keep you from any and all risk and also give you the absolute thumbs up on a business transaction contract. 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 your lawyer out of many parts of the deal.

 

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 and inventory 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 enough 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 the attorneys intimately entwined in the negotiations more than likely means 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?

 

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 completely protect you from risk – and then use common sense to make up your own mind about what you should do.

 

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

 


Getting Ready to Sell – 3 Questions Business Sellers Should Ask Themselves



Portraits of people thinking

 

If you are getting ready to put your business up for sale, you probably know that buyers will be bringing you questions – lots of them. In order to prep yourself for what may seem like an endless stream of questions, there are a few you should be asking yourself before buyers do.

 

What are you going to do if the business doesn’t sell?

If you are completely burned out and at the end of your rope (and this desperate exhaustion is what is forcing you to list) then this desperation will likely come across to buyers and will leave you in a weaker state when the time comes to negotiate. Someone who is ready to close the doors and is trying to sell as a last ditch effort to get something out of the business they hate is probably going to have a hard time making it the average of 9 to 12 months it takes to get from listing to closing. If you feel burned out, you need to try pretending you aren’t. By focusing on the strength and growth of the business, even if you don’t want to be there anymore, you will be putting yourself and your business in a far stronger position before you enter the business market.

 

What skeletons are you going to try and keep in the closet?

All businesses have their less than favorable parts. The big mistake owners make when getting ready to list is instead of facing these skeletons and issues head on, they try to devise clever solutions to hide them instead. Due diligence is a rigorous process, and anything you try to hide from buyers will eventually come out – and most likely kill your deal. If you are really ready to sell, you should be ready, willing and able to fix any skeletons before they tank a deal down the road.

 

If you could go back to day one, what would you do differently?

We know that starting over is impossible, but by asking yourself this question you are creating the answer to buyer’s questions about how they as new owners can grow the business. This insight also shows buyers that although you didn’t always have the means available to do everything you wanted to with your business, you had the best interests of the business at heart and always had your eye on growth in the future. If, when asking yourself this question, you come up with ideas that would benefit the business today, you should go ahead and implement those changes. Any improvement in the bottom line between now and the closing table could mean more money in your pocket when you sell.

 

By asking yourself some of the difficult questions you may get from buyers before you list, you are setting yourself up with good answers you can give without any hesitation. You will also be forced to face those issues you may be able to ignore on a normal day but will be faced with when buyers find them. Fixing those issues will better prepare your business for the biggest return on your investment when you sell.

 

Are you thinking about selling, but aren’t sure you are ready? Do you want some suggestions on how you can fix issues before you list? Please feel free to 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

http://www.infinitybusinessbrokers.com


The Flexible Deal: Why Business Sellers Need to Keep an Open Mind



Wouldn’t we all love to put our business on the market and get a full-price, all-cash offer on day one? As you can probably imagine, this isn’t how business deals go in the real world, so as a seller you need to be prepared for flexibility if you really want to end up at a closing table.

 

Woman performing Yoga

 

The first thing you need to be flexible with? Price. You may have a number in your head, a dream amount that would make all of the personal investment of time, energy and money into your business worth it in the end.

 

Unfortunately, a business is only really worth what someone is willing to pay for it – so your dream number is probably a far-fetched fantasy. When you first meet with your business broker, pricing will be a big part of the discussion. In order to have a successful sale, you need to price your business right from day one. Overpriced businesses get overlooked by good buyers, and most languish on listing sites indefinitely.

 

How do you set an appropriate price?

 

The price you set needs to be based on what the current market will support, what comparable businesses have actually sold for and the cash flow a buyer is buying. The original retail cost of your three year old equipment, the amount of money you spent on cosmetic improvements last year, how much it cost you to buy the business 15 years ago – these things aren’t going to contribute to a realistic price. The key here is to listen to your broker about what a sell-able listing price would be.

 

The second thing you need to be flexible about is financing. The all-cash deal is extraordinarily rare, and the vast majority of small business sales involve at least a bit if seller financing. The good news is in most seller financing deals the buyer is putting 50% or more down, so you won’t be financing the entire purchase price. The other good news is there is no set or absolute way that a seller financed deal needs to look (like there would be with a more traditional loan from a major lending institution), so you can negotiate a creative deal that makes everyone happy.

 

By offering seller financing you will also be opening up your business listing to far more buyers than demanding a full-price all-cash offer would allow. Deals that include seller financing also show buyers that you have enough faith in the future of your business that you would be willing to depend on that future to get paid. Both opening your listing to a deeper pool of buyers and by showing your faith in the future you will have a far better chance of a successful sale.

 

Are you thinking about selling your business and are wondering what an appropriate listing price would be? Do you have questions about what kinds of creative seller financing deals we’ve put together in the past? Ask us! Feel free to leave any comments or questions here.

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
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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