Everyone is an expert, right?
We all have that person in our life who talks confidently about every subject while knowing little to nothing about the things they speak of. They string together urban legend, conjecture and memes from the internet into what sounds like a coherent piece of genuine information when, in fact, it is nothing of the sort.
If you are thinking about buying a business and you’ve told the people in your life about this new pursuit, then these fact-free advice givers will come out of the woodwork. Everyone, at one time or another has considered what life would be like as a business owner – and as such almost everyone feels qualified to offer their entrepreneurial advice. You will get unsolicited advice from seemingly everyone: your brother-in-law, the mailman, your dentist, your neighbors. While everyone’s intentions are good – to help you – the information you are given should be taken cautiously. Even the opinions of those you trust, like a very close friend, should be taken within the context of whether or not they actually know anything about buying or running a business.
Take, for example, the rent payments on a waterfront restaurant. If you are considering buying a large waterfront restaurant, especially one in a desirable location, then you should expect the rent to be high. That high rent, however, when compared to comparable businesses in the same area will probably be right in line with what you should expect to pay. Also, a desirable location means more customers in the door – meaning you will be perfectly capable of paying that high rent so long as you don’t run the business into the ground.
What unfortunately happens to many new buyers is they mention this high rent rate to someone who knows little to nothing about either the restaurant industry or the area in question and they balk at the number, exclaiming “That’s ridiculous!!! Don’t buy that business!” when the opposite is true. It’s a great business and falls right in line with both the buyer’s budget and their goals for business ownership.
There are many, many examples of instances where bad advice has driven a buyer from a perfectly good business – particularly when discussing matters of price. We’re not telling you that you shouldn’t listen to the opinions of those you trust, we’re just saying that you should consider their expertise in the matter before you take their advice as doctrine.
Who should you listen to? Your business broker is a good source of information because they eat, sleep and breathe business transactions and a good broker will know their local industry inside and out. Your business broker is also a reliable source of information because it is in their best interest if you succeed in your new business. You may refer them the business owners or business buyers you meet if you are happy in your business decision, and when the time comes to sell they hope you will use them again. A great business broker gets a great deal if their business from referrals and repeat clients.
You should also listen to the advice of your business transaction attorney and your business transaction CPA (if you end up using one) as they too know the industry well.
Notice we said “business transaction” attorney and CPA, not any attorney or CPA. Your friend who practices labor law and your uncle who does accounting for a rental car company aren’t going to be able to give you good advice about buying a restaurant because that’s not what they do. It would be similar to asking your car mechanic his advice about whether or not you should undergo back surgery – it’s not his area of expertise.
The most important person you should listen to? Your own common sense. Take the information you gather from all of your sources, weigh the validity of their opinions based on their real expertise in the matter – and then decide for yourself. You are the one buying the business, not the peanut gallery, so if the decision makes sense to you then that’s all that really counts.
Are you looking at businesses to buy and getting all kinds of advice at the same time? Do you have questions about some of the advice you’ve already been given? Please feel free to leave your questions and comments here, and we will be happy to help.
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907