The Right Advice At The Right Time: The Role Of Attorneys In Your Business Transaction



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 fabulous return on your investment then that’s what everyone would do. Buying and running a business means a fair share of risk and plenty of hard work.

 

Before you bring your attorney into the mix (which you will definitely need to do), ask yourself this important question – what do they do for a living? They protect you from any and all risk.

 

It is impossible for your attorney to keep you from any and all risk and also give you a thumbs up on a business. 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 their advice to only the portions of your deal that they specialize in.

 

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 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 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 attorneys intimately entwined in the negotiations might mean 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?

 

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

 

A note here. You should also be using a business transaction attorney for this role. Your family law attorney (for example) isn’t going to understand your business contracts the way a business transaction attorney does. It would be like going to the pediatrician to get plastic surgery – it isn’t what they do. Finding and using a business transaction attorney with some experience in this very unique process will be pivotal to success.

 

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


All The Way To The Finish Line – Why You Need A Great Broker



 

Both parties have agreed on the purchase contract, you’re finished – right?

 

Not quite, and if you have a business broker who isn’t going to push your deal all the way to the finish line – then your deal could be in trouble. 

 

A contract does not mean the deal is done, it just means one step in the process has been completed. We have a very high closure rate once our deals get to contract – 70-80%, but most business brokers can’t get anywhere near that number.

 

Why?

 

Once the contract piece of the puzzle is done, many brokers walk away and let the deal fend for itself. They let things like licensing, SBA loan issues and follow-thru with details fall by the wayside – and when this happens a minor issue can become a major deal-breaker in no time.

 

A transaction isn’t closed until it’s closed.

 

Why would any broker let this happen? Once the contract is put together, most brokers think that their work is done, but the last few details are often the most important. Our process is different because we do an immense amount of pre-due diligence. We have all of the ducks in a row and have rooted out and dealt with many of the issues that come up at the end long before they become potential deal killers. Then, we don’t stop until the deal is done.

 

Let’s focus on just one of the often-overlooked last-minute details to give you an example of the importance of getting all those final ducks in a row:

 

If you as a buyer have no idea what the licensing requirements are for the business you are about to take over, how can you possibly have all of those requirements complete on the day you get handed the keys? Any business transaction means that at the very least all licensing must be transferred from the old owner to the new, and many of these licenses come with an inspection requirement that needs to be fulfilled before the business can serve customers. What does that mean if you don’t complete the necessary applications and inspections before the day you take over? You can’t open the doors until they are all complete, so having a broker who is on top of issues like licensing will be crucial for a successful transaction.

 

If you are a seller who offered seller financing, then it is in your best interest for the transition to the new owner to go smoothly. An incomplete licensing, permitting or inspection requirement will put the transition and the future of the business in jeopardy (meaning you won’t be able to get paid). Having a broker who is proactive on the licensing front (and all other fronts, for that matter) will mean a more successful transition to the new ownership and a far better chance for the new owner to find success right out of the gate.

 

Ask your broker how many of their deals make it to closing once the contract step has been reached. Their answer to this question will tell you all you need to know about their follow-through and whether or not you’ll be able to make it to the closing table.

 

Are you buying a business and want to know more about the process to transfer licenses? Are you selling your business and would like to know what aspects of your transaction will need to be followed all the way to the end? 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

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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