Why A “Used” Franchise Is Better Than Brand New

In our society, the word “used” typically carries with it a less than ideal connotation – it means that someone else got the best and the “used” buyer is left with what’s left.

 

In the business world, however, “used” gets a boost because a “used” business is an existing business. Existing businesses are good.

 

If you are thinking about getting into the franchise ownership game, you will have to initially decide if you want to start a new franchise location or try to find an existing franchise location to purchase.

 

 

If this is your first business or your first franchise – then buying existing is probably the best option.

 

Why?

 

An existing location is proven.

A franchise location that already exists and is currently running is far less of a gamble than putting a brand new franchise in an unproven location. An existing location also has an existing staff and it’s own established daily operations. There won’t be as much guess work for you as the franchise owner because there will be a seller there to train you as to what works and what doesn’t at that particular location and with that particular staff. An existing location is turn-key instead of starting from scratch.

 

An existing location has records.

Another major benefit only an existing location will have? Records. Deciding how much a business is worth to you as a buyer is far easier if there are records of the cash flow and finances of an already existing location. Buying new means a great deal of guesswork as to the future projections on your investment.

 

An existing location already has customers.

You might be considering a franchise because it comes with the added benefit of an already loyal customer base. The brand will definitely get people in the door, but and already established location will come ready-made with regular clientele.

 

An existing location offers flexibility during negotiations.

When you start a new franchise location, there are often strict rules and fee structures you must abide by – and very little (if any) room for negotiation. When you buy an existing franchise, there will likely be fees associated with an ownership transfer, but the price you pay and the terms of your deal will be largely in the hands of you and the seller. This may allow you some wiggle room in terms of price and contract terms, but this will depend on the franchise itself.

 

If a franchise is the business path for you, don’t get hung up on the “used” nature of an existing location – for most buyers it can be a far better bet. Ask your business broker about what franchises are currently available on the market and about the terms required to take over an existing franchise location.

 

Do you have more questions about how the process to buy a franchise differs from buying an independent small business? Do you want to know what the purchase of a franchise might cost? Please 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

www.InfinityBusinessBrokers.com

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Borrowing From Family To Buy A Business? A Few Considerations

We’ve all had those pie-in-the-sky conversations at the dinner table over the holidays, when the discussion turns to entrepreneurial ambition and your uncle/grandmother/father says something along the lines of “Sure, I can help you buy a business!”

 

When considering borrowing money from family members (or from anyone with whom you have a personal relationship), there are a few things you should consider.

 

Buying a small business is a very expensive venture, where you will need working capital in addition to the amount you offer because of necessities like licensing fees, lease deposits, payroll and initial inventory – just to name a few. What your relative initially considered loaning you/investing in you will probably not be enough, so they will likely need to write a much bigger check then they had imagined.

 

They will also need to provide financial records to business brokers, sellers, landlords and property managers – even licensing agencies in some cases. This can be uncomfortably intrusive if the business in question isn’t even yours.

 

If these considerations have you possibly rethinking borrowing from family, just remember that you absolutely can borrow from family successfully – there just needs to be good communication between both parties and a contract of some kind to ensure everyone is happy in the end.

 

You can also ask your business broker about other financing options that may be available.

 

You and the business you are interested in may qualify for financing through the Small Business Administration (SBA), for example. Want to read more about this financing option? Click here to read Business Buyers: A Guide to Financing and the SBA (U.S. Small Business Administration).

 

In most cases seller financing may also be an option, allowing you to purchase a business with help – but without the personal strings attached. Want to read more about this financing option? Click here to read The Business Buyer’s Guide to Seller Financing.

 

Were you considering family financial help, but now think a SBA loan or seller financing might be a better way to go? Do you have questions about what a family loan contract might look like? Ask us! Please feel free to leave any questions or comments here, 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

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Tick, Tock – Why Business Buyers Need To Make The Most Of Due Diligence

If you are in the midst of your business search, then a major step in the process to buy a business is coming your way – due diligence.

 

This step in the business buying process occurs once an offer from a buyer is accepted by a seller. The business is pulled from the market and placed in a sort of limbo so the buyer has a chance to review all business related documentation and then make a final decision about whether or not they wish to buy the business and how much they would ultimately like to offer.

 

This limbo phase is great for buyers because it essentially stops the access of other potential buyers to the business they want and gives them a chance to peek behind the scenes.

 

Due diligence is not, however, an indefinite period that can drag on forever. A typical due diligence period is two weeks. That’s it, and honestly that’s all you really need. We regularly get requests for due diligence periods of multiple weeks or months – but that extended amount of time is unnecessary and unfair to the business itself.

 

Why is an extended due diligence period unnecessary? If you’ve made an offer on a business, you’ve already seen a good deal of the financial information and have a decent understanding of the inner workings of the business – like the contractual agreements the business has with major clients (for example). You don’t start the due diligence process with a blank slate, it is instead a more in-depth look at something you are already familiar with.

 

Since you aren’t starting from scratch, you should use your due diligence time efficiently. You should review the documentation as soon as you get it, thereby giving yourself a few days to think about your upcoming decisions. You should also have your broker or your business transaction accountant help you if you have questions – but you need to get them any questions and any documentation promptly as they may not be able to get to it right away. Don’t wait until two days before due diligence is over to rush the paperwork to an accountant and then try to request an extension. Procrastinating during due diligence could mean you are rushed into a decision without having reviewed the information thoroughly – leading to unnecessary surprises down the road.

 

Why is an extended due diligence period unfair to the business? An extended due diligence period pulls a business off the market and shifts a seller’s focus to just one buyer. The seller has to take time away from the day-to-day operations of the business to provide requested information and answer buyer questions. At the end of an extended due diligence a buyer can then decide they don’t want to move forward with the business sale, leaving the seller to start over with the process of finding buyers after an extended absence from the market. To shift focus for a period of two or three weeks isn’t unfair – but to ask a business owner to change their focus for weeks or months is.

 

If you are in the market to buy a business, it is in your best interest to use the due diligence period to your advantage by working quickly with the information you are given and giving yourself the time to think about the decisions you need to make. It will alleviate some of the stress of the business buying process and allow you discover any surprises before they become a problem down the road.

 

Are you looking at businesses and are concerned that a two week due diligence period won’t be enough? Do you have more questions about what happens during due diligence? Ask us! Please leave 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

www.InfinityBusinessBrokers.com

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They Google You Too – Advice For Business Buyers

If you are in the market to buy a business, then what is one of the first things you will likely do when you find out the name and location of a prospective business? Hit a major search engine like Google and plug in the name.

 

What many buyers fail to realize, however, is once a seller finds out your name they will do exactly the same thing.

 

Buying a business is not at all like buying a car. When you are shopping for businesses, you are essentially shopping for a job – so just like a prospective interviewer would do, business sellers are going to look you up.

 

You also have to consider that the business you buy is someone’s baby, a business where they have invested countless hours and a great deal of money. For most sellers, there is an emotional connection to their business, and as such they won’t be willing to hand over the reins to just anyone. The legacy of their business can be just as important as the check you write.

 

In addition to the emotional connection, in business sales there is typically a training period of several weeks – so major personality differences between buyer and seller can cause a whole host of problems.

 

Another major factor that will cause a seller to look you up? Seller financing. In most small business transactions, the seller finances part of the deal. Since they are keeping some skin in the game, it will be very important to know who you (as a buyer) are and if you are the kind of person who will be responsible enough to pay back the debt.

 

If you are in the market to buy a business, ask yourself this. What happens when someone Googles your name? If you haven’t ever checked, you should.  

 

Your online presence will speak volumes to a seller who has never met you, and in some cases, brokers themselves will even Google you before agreeing to work with you.

 

What should you do if you are in the market to buy a business? The first thing you should do is set any social media you use for personal use to private. Only those people you know should be able to see things from your personal life, not prospective sellers.

 

You should set up a professional social media account on a site such as LinkedIn or a more professional Facebook page that sellers and brokers can see. You should also abide by basic social media guidelines that anyone would use if they were going into a job interview. No pictures of drunken debauchery, no rage-infused political rants, no dirty jokes – you get the idea.

 

If a cursory search for your name turns up nothing but pictures of you partying hard – it may reflect poorly on you as a competent professional and leave sellers uncomfortable with your ability to get the job done. Clean up your social media image before anyone looks you up.

 

Are you a buyer looking at businesses and hadn’t considered your online image? Would you like to know what else you could do to make yourself more appealing to sellers? Please 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

www.InfinityBusinessBrokers.com

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Buying A Business? 3 Ways To Find A Great Broker

If you are considering buying a business, then you’ve probably started looking for a business broker to help you. If you haven’t, you should, as the business transaction process can be dauntingly complex and rarely makes it to a successful closing without some qualified help.

 

If you are broker shopping, you will quickly discover that there are a lot of options.

 

How do you choose the right professional to help you?

 

First, avoid any “part time” brokers. Many, many business professionals like real estate agents, attorneys, accountants – we’ve even come across doctors – “moonlight” as business brokers. Their attempts in our industry are on a part time “dabbling” basis, and as such they rarely know what they are doing. You wouldn’t come to a business broker if someone was threatening you with a lawsuit, so why would you use an attorney to navigate a business deal? Look for business brokers who are only that – full time brokers.

 

Secondly, you want to avoid business brokers who have “proprietary methods”. Some brokers use their so-called proprietary methods as a selling point, but from an industry standpoint there really isn’t anything about what a broker does that could ever really be proprietary. Any broker who gives you the “I am the only one with the special sauce” routine is trying too hard to impress you instead of focusing on what’s important – finding you the right business.

 

Third, you want to avoid business brokers who spend a small fortune on advertising. Brokers who are spending money on multiple television ads, massive full-color mailers and dozens of radio spots are again spending too much of their time focusing on the wrong aspect of their business.

 

What should you use to find a great broker? Referrals. If you find a business broker who gets the vast majority of their business from referrals, then you’ll be in good hands. Referrals come from past buyers, sellers, other industry professionals like attorneys and accountants – and these referrals amount to a great review of that broker’s previous work. Those past clients and professionals trust this broker enough to send the people they know their way. If you are talking to a broker, ask them how much of their business is referral based. A broker with a ton of referrals will be someone who can get the job done and find you a great business.

 

Would you like to know more about how to decide on a business broker? Would you like to know about our referral rate here at IBB? Ask us! Please 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

www.InfinityBusinessBrokers.com

 

 

 

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BEFORE You Get On The Plane – A Successful Business Buyer Trip

 

The rapid approach of another holiday season and the end of the year can cause a budding entrepreneur to rethink their current life and consider other options. New buyers come to the market curious about what life might be like as the owner of a business, and many who are visiting from northern climates experience the beautiful winter weather of Florida and seriously consider a move south.

 

There are amazing business ownership opportunities in the Sunshine State, and we would love to help you find the one that is right for you – but there is one very important element of the business buying process that buyers should know long before they set foot on a plane.

 

You absolutely, positively can’t call about a business one day and see it the next.

 

This one is frustrating for both business brokers and buyers alike. If you call us today and tell us you are only in town for another 24 hours and you want to see one of our businesses – the answer is no.

 

We would love to accommodate you, but it just isn’t possible, especially during this time of year.

 

In order to see a business, we would have to know that the business is right for you and that it is a business you could successfully afford. There is no sense in wasting your time looking at businesses you couldn’t or wouldn’t want to buy. Then you would have to sign the appropriate non-disclosure agreements. Then a showing would need to be coordinated between your schedule, the schedule of your broker, the schedule of the seller’s broker, the schedules of the sellers themselves and at a time when the business isn’t operating or when the employees will not be around (for confidentiality reasons).

 

This complicated mix of conversations, paperwork and meshing of schedules is going to be extremely tough during the holiday months in particular because many of the necessary parties are traveling or hosting family and won’t be available.  

 

It is possible, however, for all of the necessary background, non-disclosure agreements and schedule juggling to be done – with enough notice. Just realize that 24 hours or even a few days aren’t going to be enough.

 

If you are considering taking a trip south and looking at businesses, make contact with a broker and work on setting up these visits before you even buy your plane tickets.

 

We say this because we want your business search to be successful and we want you to find and see businesses that are right for you. The right business for you is going to depend on things we can’t know about you until we’ve had a chance to talk to you about your goals for business ownership and the amount of money you actually have available to buy a business. The right business for you will also be found by looking at many listings, reviewing financial statements and having conference calls with multiple sellers – all long before you set foot in an actual, physical business.

 

We also want you to be able to make the most out of your time here – so by researching and vetting the businesses that meet with your goals, by already talking to sellers via conference call – you can efficiently see the two or three businesses you are already serious about buying when you come for a visit.

 

Set yourself up for business buying success by starting your search before you buy your tickets to Florida!

 

Are you a buyer who has tried to see a business last-minute and would like to know more about why this isn’t possible? Are you curious about the business ownership opportunities available in Florida? Ask us! Leave any questions or comments here, and we would be happy to help you on your journey to business ownership.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

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Buying A Business? Focus On Cash Flow, Not Assets

What should you care about, assets or cash flow?

 

When you begin the search for a business to buy, your initial tendency might be to think about buying a business in the same way you would buy a house. Buying a home or buying property means you are exchanging money for something physical – a structure or a piece of land.

 

Many new business buyers apply this same logic to the purchase of a business, focusing on the assets or inventory of the businesses they find interesting.

 

If you are buying a house, the finishes and included appliances absolutely factor into the price, but using the perceived value of the comparable physical assets found in a business (like a kitchen hood or vehicles) to judge a listing price won’t work.

 

 

Why? When you buy a business, you are buying cash flow. You are buying an income stream that is generated through the use of the assets – but the truth is most small businesses don’t have many assets to speak of. Most of the time, the physical location of a business isn’t owned by the business owner – a commercial lease is in place. In some cases, the equipment that has been installed (like the hood system in a restaurant) belongs to the landlord as well.

 

We will use the restaurant example to further illustrate this point. When you buy a restaurant, the expectation is that all of the equipment is in working condition, like the grill in the kitchen. You are buying the cash flow that is generated by the use of the working grill. The grill is critical to generating that cash flow, but outside the confines of the business the grill has no value on its own to a business buyer.

 

There are a few instances where the physical assets, like a grill, will play into price. As we just mentioned, the expectation is that everything is in working condition. Excessive equipment, not enough equipment or equipment that isn’t in decent working order can decrease the amount you as a buyer offer on a business – as in each of these scenarios you will have to make changes in order to get the business in proper working order when you take over.

 

It is important to note, however, that not liking the aesthetics of the equipment doesn’t mean you can discount it. If you are looking at a house with granite counter tops and you only like quartz counter tops – this aesthetic difference doesn’t mean you can take $10,000 off of your offer. The same holds true in business transactions. If the business has the necessary working equipment, then it has the necessary equipment- ugly or not. Your offer and consideration of each business should be based on cash flow, not assets.

 

Do you have more questions about how to evaluate the listing price of a business? Would you like to know more about how to use cash flow and multiples? 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

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Want To Buy A Bar Or Restaurant? Maybe You Shouldn’t

“I’ve always wanted to own my own restaurant”

 

We hear this one a lot. You might have a passion for great food, you might love the bar scene – but these loves from the patron perspective rarely translate to success on the business ownership side unless some basic requirements are met.

 



What are these requirements?



Experience



There are very few people who have little to no restaurant industry experience that have succeeded as the owners of a food service establishment. More often than not, the restaurant industry rookies that manage to buy a bar or restaurant drive it right into the ground in a shockingly short amount of time (we say “manage to buy” here because many property managers will refuse to issue a commercial lease to restaurant newbies).



The food service industry is rough. It requires an enormous commitment of time and energy. It requires the personality to wrangle a staff of typically young and inexperienced servers and bartenders while simultaneously ensuring no one is giving away your food and booze or taking money out of the till.



Sounds like fun, right? Not so much. If the restaurant industry is your passion, and you’ve spent a good deal of your working life learning the ropes as an employee or manager in this industry – then restaurant ownership will probably bring you success. If you don’t have the passion or experience, you should seriously, seriously consider something else.



Enough Capital



If you have $100,000 to invest in a restaurant, then you shouldn’t be looking at restaurants in the $100,000 price range. Why? Writing a check for the full amount of money that you have just to take ownership of a restaurant or bar means you are setting yourself up for an almost immediate failure. Working capital is essential in any industry, and the restaurant industry is no exception.



You will need money available for the litany of licensing requirements necessary for establishments that serve any form of alcohol. You need capital available to cover payroll for the first few weeks after you take over. You need the money to pay your vendors for the inventory you need to keep your patrons fed and happy. You need enough money to keep the doors open long enough to start turning a profit with you at the helm.



Consider the need for working capital when deciding what you can and can’t afford in the restaurant-for-sale market long before you start writing any checks.



Willingness To Work 24/7



If you are someone who is very involved in the lives of your children and need to be home every evening to help coach their soccer team, then buying a bar is probably not for you. The restaurant industry requires long, weird hours (think about when most restaurants and bars are open – like nights and weekends), so if the life you want to have outside of business ownership does not jive with these hours you might need to consider another industry.  



It’s also not for you if you are the kind of person who likes to take a handful of long vacations every year. This industry deals with a lot of cash, and as such it is an industry where it is incredibly easy for employees to steal a little off the top. Successful restaurateurs are vigilant and omnipresent in their establishments to ward off these sticky finger issues.



If you have the drive to keep strange hours, the experience to get you through and enough capital to pay for the bar or restaurant you are interested in – then you have a great chance at success. If not, then there are plenty of other industries where you can meet your goals for business ownership without having to serve food or sling drinks. Talk to your business broker today about your goals and experience and they can help guide you to the right business.



Have you always dreamed of owning a restaurant, but don’t believe us when we say prior restaurant experience is a must? Have you had a disastrous restaurant or bar ownership experience that could help others that you’d like to share? Please feel free to leave comments or questions here 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

 

 

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Do You Really Want To Buy A Business? Prove It.

Why is everyone blowing me off?

 

If you’ve spent any time as a potential business buyer, you likely know what we’re talking about. No one will return your calls. Brokers seem apathetic at best. Sellers act like you are wasting their time. It’s like pulling teeth to get anyone to give you any information.

 

What gives?

 

It’s a numbers issue. The business-for-sale marketplace is full of buyers, but very few of them are serious. The stats show that a mere 10% of potential business buyers actually end up buying a business, so 9 times out of 10 a buyer really is wasting everyone’s time.

 

Ok, but I’m a serious buyer. How do I get everyone to take me seriously?

 

 

Be ready.

 

You need to be serious about buying a business before you start making phone calls. If you’re in the very preliminary stages – think several years before you plan on taking the entrepreneurial plunge, you need to make that clear when you talk to a broker. Explain that you are considering business ownership down the road, but would like their input on what types of businesses would fit your goals. If you are further along in the process and actually ready to buy – make that clear as well.

 

Know what you want.

 

You need to have clear goals for business ownership. What do you want out of owning a business? Do you want a more flexible schedule? Do you need more time with your kids? Are you looking to make as much money as possible and then sell the business in a few years? Your goals will guide what type of business is right for you, so you need to have those goals in place before you start asking for conference calls with sellers.

 

Be honest about your money.

 

Nothing is worse than getting close to a closing table, only to find out the buyer doesn’t have the money they said they did. You need to be 100% honest and upfront with your broker about the actual funds you actually have right now. You also need to listen to your broker when they tell you it’s a terrible idea to look at $100,000 businesses when you only have $100,000 to spend. You need to leave some working capital in your pocket so you don’t bankrupt your business immediately after buying it.

 

Make offers.

 

Once you know what you can afford and what your goals are, actively look for businesses. Once you’ve found one that fits – make an offer. The transaction process can’t begin until you do, and you can walk away from any business up until the moment the closing documents are signed – so making an offer doesn’t mean an absolute commitment to that particular business.

 

The message here is it can be tough to get the industry to take you seriously, and although it isn’t your fault that the numbers aren’t in your favor – there are things you can do to stand out from the crowd.

 

Have you always wanted to buy a business, but you aren’t sure where to start? Are you serious about buying but no one will give you the time of day? Please leave any questions or comments here, and we would be happy to help you on your journey to business ownership.  

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

 

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Buying A Business With A Partner? Why You Need A Break-Up Contract

 

Buying a business is a huge and sometimes overwhelming project, one that can oftentimes be better handled with a business partner to share the load. A good partnership means sharing the responsibilities, costs and schedule that buying and owning a business demands. Good business partners both bring their own unique and complementary skills to the table – allowing the partnership to help the business grow.

 

A good business partnership also has one all-important thing. A break-up contract.

 

What’s a break-up contract?

 

Similar in nature to a prenuptial agreement before a wedding, a “break-up” or partnership contract is an iron-clad and very detailed contract business partners sign that clearly states – in writing – the what and how if one of the partners decides to (or needs to) leave the business.

 

I’m buying a business with my best friend of 20 years, we don’t need a break-up contract.

 

Yes, you 100% do. Business partnerships fall apart every day, and sometimes it isn’t even because the relationship between the partners has soured. What if your best friend of 20 years gets divorced and his now ex-wife wants the business sold so she can have back the money they invested as a married couple when you first bought it? What if you have to leave to take care of a sick parent overseas and won’t be able to contribute to the business anymore? Having a predetermined plan in place makes the split easy at a time when life probably isn’t.

 

My business partner is going to think I don’t trust them if I ask to put together a contract like this.

 

First, if your business partner is making a judgement like this – they aren’t keeping their personal feelings out of what should be a purely business decision. Second, if you are worried that you might offend your partner – open the discussion by saying you both need to have a plan in place so the business can survive if something happens to one of you.

 

This seems like an unnecessary step.

 

Even if your business partnership ends amicably down the road, not having a contract in place can mean massive legal bills for both of you when it does happen. This is especially true if the split comes because of something like a divorce. You need to spend the small amount of effort and money now to protect both of you and the future of the business.

 

The message here is every business partnership will eventually end. That end can be a painful and expensive nightmare, or you can plan ahead and put together a business partnership contract that lays out what happens instead.

 

Are you thinking about buying a business with a partner, but hadn’t considered a “break-up” contract? Do you have questions about what a contract like this might look like? Please 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

www.InfinityBusinessBrokers.com

 

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Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

9040 Town Center Parkway
Lakewood Ranch, FL 34202




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