Buying A Business? Commercial Lease 101

You’ve found a great business and are excited to start negotiations with the sellers – but here’s a thought you may not have considered. That’s not the only negotiating you’re going to have to do.

 

When you buy an existing business, you typically are not buying the physical space that the business occupies.

 

Most businesses come with a lease, and that lease comes with a landlord and/or property manager.

 

 

Most landlords accommodate transfers easily, but not all do. Deals can get hung up on the lease when the landlord refuses to grant the transfer or has decided to change the lease terms dramatically. They can also get hung up if you don’t start working on the transfer until the last minute. 

 

The most important thing you can do as a buyer is get your hands on a copy of the current lease as soon as possible, and then deal with any lease issues long before the day you are supposed to close your deal.

 

Once you have the lease, the language you would typically want to see is in the section of the lease that has to do with transfers or assignments of the lease. Does it say something along the lines of “any assignment will not be unreasonably withheld”? If it does, you are probably in good shape. This type of language means the landlord would have to come up with a very good reason to keep from transferring the lease to you.

 

Landlords, for the most part, are concerned with keeping a rental space filled and generating rental income. Some, however, are unwilling to reassign leases (at least initially).

 

This is a part of the business sale process where your business broker will be an invaluable asset. They can act as a buffer between you and a difficult landlord, and can help to negotiate your new lease or the reassignment of the old lease to keep the lease rates reasonable.

 

Another way to keep the lease from holding up your closing is to be forthcoming with your financial information when the landlord asks for it. Most landlords are going to want to see some kind of financial statement that proves you have the capital to keep the business open. It would be foolish for them to rent to a tenant who will be forced to close the business doors only a third of the way through the lease. Some landlords also want to see some kind of resume or work history to show you have the experience necessary to keep the business running and profitable.

 

You should also be aware that in some cases the rental rate will slightly increase from what the seller is currently paying when you get a new lease. You can negotiate a lease extension at the same rate, but eventually your new lease may come with a new rental rate. You will also be responsible for coming up with the deposits necessary for the lease.

 

The message here is your business won’t be much of a business if you can’t get a lease assigned to you for the space. Deal with lease issues early on and the won’t become a big headache in the end.

 

Are you a business buyer who has questions about business leases? Have you had a deal fall apart because of a difficult landlord? Please feel free to leave us a comment or question here, and we will be happy to assist you with any lease questions.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Could Vs. Should – Buying A Business Without The Right Help

If you’ve ever bought a house or have even just rented an apartment, you know the importance of agents in those transactions. Your real estate agent or your rental agent helped you with locating potential properties, let you in to take a look around, assisted with your purchase or lease contract and was there throughout negotiations. While it is possible to buy a house on your own or rent your own apartment, it’s definitely easier with someone who knows what they’re doing by your side. When it comes to the small business market, the same will be true. It’s going to be much easier with help.

 

Business transactions are inherently very, very complex.

 

If you’ve never been through a business transaction before you are probably going to have an impossibly difficult time navigating everything that needs to happen. That’s where business brokers come in

 

 

A business broker is a transaction agent. Their job is to get a business sale from start to finish. They help buyers by guiding you through from you initial contact all the way past the closing table.

 

Your broker will talk to you about your goals for business ownership, the amount of capital you are able to invest, the areas where you would like your business to be located and your education/experience. Your broker will then help you with your business search, narrowing down the choices based on your feedback. Once you have found a business or two that interests you, you will sign nondisclosure agreements to gain access to the business name and some cursory financials. If you like these businesses your broker can schedule conference calls with the sellers as well as site visits when there are no employees or clients around. Your business broker will then help you write your offer which, if accepted, will become the purchase contract. The business brokers will act as buffers during negotiations between you and the seller – a very important role. They will also negotiate with your future commercial landlord and property manager to ensure you get a fair lease. Your broker will also help you with the licenses and permits required for you to take over as owner.

 

This is a big list – and it would be quite an undertaking for someone who has never been through it before. Very few business transactions go through successfully without help. An experienced and qualified business broker has not only been down this road many times before, but they know where the pitfalls are going to be and can help you avoid them. 

 

The message here? Could you buy a business without a business broker? Maybe. Should you? Definitely not.

 

Are you considering buying a business but aren’t convinced you need a business broker? Do you have more questions about what a business broker can do to help you throughout the transaction process? Please feel free to leave any comments or questions. We would be happy to help!

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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The Justifiable Offer: Why A Low-Ball Is A Bad Idea

You’ve done the searches. You’ve analyzed your options. You’ve done a few conference calls with sellers and you think you’ve found the right business for you. Your next step is a big one, and your decisions here can absolutely make or break your chances of buying this business. It’s time to make an offer.

 

Your offer is important for a number of reasons. The offer you put together (if accepted) will become the purchase contract. This contract will include not just the final sale price but many other parts of the transaction that will need to be negotiated. Think the length of your training period, the terms of the deal and how existing contracts will be assigned – just to name a few.

 

This all-important document essentially contains all the parts of your deal that will need to be negotiated. The fluid nature of an initial offer/purchase contract means the first version – your version – is just a place to start those negotiations. It should go without saying that you need to start off on the right foot. 

 

 

The relationship you have with the seller, although not a permanent one, will be critical to the success or failure of your transaction. You have to talk to this person, meet with this person, iron out a deal with this person and then most likely work side by side with this person during your training period.

 

This is not a relationship you want to start with a perceived slap in the face.

 

What do we mean by that? You do not want to low-ball a seller just to see how desperate they are or how great of a deal you can get. People who intentionally low-ball business sellers aren’t business buyers. They’re tire-kickers. Your initial offer speaks volumes to a seller about how serious you are and what it’s like to work with you. You are making a financial offer for something that seller has invested countless hours in, has spent years building and has made sacrifices to maintain. Yes, business transactions shouldn’t be emotionally driven, but in the small business market it really can’t be helped. No one wants their blood, sweat and tears treated like a cheap car.

 

What should you do instead?

 

Make a JUSTIFIABLE offer.

 

A justifiable offer is a simple concept – it’s something based in reality and backed up by data. You’ve looked at the numbers, you’ve considered the current market and you’ve come up with a number that makes sense – not the lowest, rock-bottom price you’d love but something you feel (based on the data you have) is fair.

 

Making a fair offer tells a seller that although you may not want to give them their full asking price, you are a person interested in making a deal happen. You are someone who values their business and all they’ve invested. 

 

How do I make sure my initial offer is fair? Talk to your business broker about what you’d like to offer, and then listen to their advice. They know the market, and can give you insight into whether or not the number you’ve come up with will be a good point to start negotiations.

 

The message here is simple. If you are serious about buying a business the best way to start your transaction is by making a fair and justifiable offer. 

 

Have you looked at businesses and want to know more about how sellers come up with their listing price? Do you have questions about what an initial offer/purchase contract entails? Ask us! Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Follow The Rules: How To Keep From Killing Your Deal

Buying a business can be (and often is) an intensely frustrating process. When you have questions, when negotiations are in full swing – even getting initial information usually means you spend a lot of time waiting. Waiting for the seller’s broker to contact the seller. Waiting for the seller to get together the documentation you’ve requested. Waiting for an attorney to look over a contract. Waiting for approval by your new commercial landlord. Waiting for licensing and permitting requirements to go through. It takes an enormous amount of personal patience to see it through.

 

This huge patience requirement can make you feel a little crazy – maybe even crazy enough to try and push the process along by yourself.

 

What do we mean by that?

 

The process of buying and selling businesses comes with a rather rigid set of rules. The majority of those rules seek to protect the deal on two fronts. They protect the confidentiality of the transaction itself and they protect the buyer and seller from each other.

 

Why does a transaction need confidentiality and why shouldn’t you push to break it? Breaching confidentiality might not only kill your deal, it could potentially cause a fatal blow to the business you are hoping to buy. Business sales happen under a strict veil of confidentiality for a few very important reasons.

 

The most important of these reasons is the incorrect but pervasive assumption that a business for sale is a business on the brink of failure. This notion can destroy a business if the news gets out that it’s on the market. Employees can panic and leave. Clients can cancel big contracts. It can be devastating. As a buyer you have to keep the for-sale status of prospective businesses under wraps. You will not only be required to sign non-disclosure agreements – you will be forbidden from talking to staff on your own, from emailing the owner directly (in many businesses the owner’s email is accessible to their staff), from calling the place of business and asking for the owner, from visiting the premises without permission, etc.

 

While it might be tempting to email or call the seller because you’re tired of waiting for the brokers and attorneys involved to get you the information you’ve been asking for – don’t. One seemingly insignificant point of contact can cause a disastrous cascade. The rules exist for a reason. You have to follow them.

 

This leads us to the second set of rules that protect the buyer and seller from each other. Even if you are following the rules that protect confidentiality to the letter, it might be tempting to bypass the intermediaries and talk one-on-one with the seller (if you somehow have their home phone number, for example). Don’t do this either.

 

Why?

 

The better question is why do the intermediaries, the business brokers, exist? They exist because the complex tangle of a business transaction requires experience and it also requires a buffer. A seller is selling their blood, sweat and tears – something that may be their life’s work. They have a deep personal connection to their business – and a buyer can quickly and easily derail a deal by asking the wrong question, by making an innocent assumption, by saying the wrong thing. Those questions and remarks can offend a seller to the point that they will refuse to work with you – and your deal is dead.

 

Follow the advice of your broker and keep the flow of communication between you and the seller flowing through the people who you hired to keep your deal on track. Negotiations are far easier when the seller is still willing to talk to you.

 

The message here is the rules that cover your business transaction are there for a reason. Someone, somewhere messed up their chances of becoming a business owner – and their cautionary tale will keep your deal safe.

 

Are you a business buyer who thinks the rules are a pain and want to know more about why they are so important? Do you have a story about a derailed deal that could have been protected? Please leave any questions or comments here, and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

 

 

 

 

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Why Walking Away From Your Business Is A Big Mistake

Small business ownership can be tough.

 

We know because we’ve owned businesses ourselves. The long hours, the responsibility – sometimes you feel like just locking the doors. Add to that the current state of affairs. Shut downs, required social distancing and the like. It can be really tempting to just say “forget it” and walk away. 

 

 

Don’t do it! Walking away keeps you from getting a return on all of the investment of time, money and energy you’ve put into your business. Selling your business, no matter what state it’s currently in, gives you a chance at both continuing the legacy of what you’ve built by keeping it open after you’ve left – and walking away with some money in your pocket as well.

 

Yes, it takes patience – but you can see it through. It typically takes somewhere between 9 to 12 months to get a business from listing to closing – but this time frame is entirely dependent on the type of business, the buyers currently in the market, the efforts of the business brokers involved, the efforts of the seller and the characteristics of the business itself. Some businesses sell right away, others take longer than 12 months. The only way to know how long it will take to sell your business is to give selling a try.

 

It also takes flexibility and a good dose of reality. We’ve had clients walk away from decent offers – think hundreds of thousands of dollars – because the offer wasn’t for the full price of the listing or they were too burned out to go on. They locked the doors and left all of that money on the table.

 

Unbelievable, right? Walking away with something is far better than walking away with absolutely nothing. It is also far better to hang in there for a little while longer and walk away check-in-hand.

 

We’ve also known folks who refused to try to sell because they didn’t want to pay a commission to a broker. The amount of work it takes to get a business transaction successfully through to closing makes paying for a broker’s help invaluable and a completely sensible business decision. In fact, using a good broker is typically the difference between selling successfully and not selling at all.

 

Worried about how much the commission would be? Negotiating the broker’s commission rate is something you get to do before you list, so if you don’t like the number you can absolutely walk away. Before you do, however, realize that the chances of a business seller successfully getting to closing on their own is usually slim to none – and if you can’t sell on your own you will more than likely be leaving a lot of money on the table.

 

Don’t lock the doors. Call us instead.

 

Have you considered selling your business and want to know what businesses like yours have recently sold for? Would you like to know more about selling a business that is currently closed? Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Selling? Why A Business Broker Is An Absolute Necessity

Are you thinking about selling your business and having these thoughts? 

 

I’ve owned a business for years. I know what I’m doing, why would I need someone to help me sell it?

 

Guess what? You absolutely need someone to help you sell your business – especially now in these uncertain times. That person is a business broker and they will be pivotal to your success in the business-for-sale marketplace.

 

 

Why? 

 

You have put your blood, sweat and tears into your business to make it what it is today. When you sell your business, you want to get as much as possible for all of your hard work, and a business broker has the ability to do that for you.

 

Business owners are smart people, and they are great at what they do. Does that mean that they are qualified to sell their own business? Probably not.

 

A business owner has knowledge and expertise in their own industry, and the success of their business depends on their ability to focus on keeping the business going. A business broker has knowledge and expertise in the world of buying and selling businesses, and as a business seller you will need and appreciate this expertise throughout the selling process.

 

A business broker has the time to focus on selling your business, and the know-how to keep the whole thing confidential. This confidentiality is crucial if you don’t want to risk losing clients, vendors, and employees if the word gets out you’ve put the business up for sale. Brokers also have the ability to reach far more potential buyers than you could on your own. They belong to networks and have access to databases where they can market your business confidentially. Business brokers also know buyers who are on the lookout for specific kinds of businesses, so as soon as yours goes on the market, they will likely have people who may be interested. A business broker has a great deal of business marketing experience, and knows how to put together a marketing package that will bring the right kinds of buyers to you. They are then able to act as an intermediary between you and any potential buyers.

 

Most importantly a broker takes the pressure of the sale off your back so you can focus on doing what you need to do in order to keep the business moving in the right direction. 

 

Don’t take so much on your shoulders by trying to sell on your own. Get the right help.

 

Are you considering selling your business but still don’t think you need a broker? Would you like to know more about how a business broker helps you sell your business? Ask us! Leave any questions or comments and we would be happy to help.

 

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Is It Crazy? Help With Business Listing Prices

 

If you’re new to the business buying marketplace you will probably notice something right out of the gate as you begin your search – listing prices seem like they’re all over the map. 

 

How are you supposed to figure out if the listing price is fair?

 

While initially confusing, the listing prices of businesses can and do make sense in most cases – you just need to know how to look at the number the seller wants objectively.

 

Your best bet as a new buyer is to get some professional expertise on your side. Talk to a qualified business broker about some of the business prices you’ve seen and ask for their input. The listing price of a business can be a very nuanced thing. It’s often based on cash flow, but sometimes metrics like industry standard multiples, values of equipment and inventory, what comparable businesses have recently sold for, etc. can be part of the equation that leads to a listing price. Experienced eyes will be necessary to tease out the important details and help you decide if what a seller wants is fair – or well beyond the realm of reality. 

 

Why would someone list a business for a crazy high price? Sometimes those sellers are more interested in being told what they want to hear than they are interested in selling. Sometimes they are listing just to see if someone will make them an offer. In some cases these sellers will negotiate with buyers who come up with a fair and justifiable offer, but if they won’t – it’s probably time to move on. An extreme price can be a red flag that it will be very difficult to put a deal together. 

 

A realistic seller will be able to back up the number they’ve asked for. They will have the financial documentation that shows their request is legitimate. These sellers are willing to negotiate when presented with a fair offer, because ultimately a business is only worth what someone is willing to pay for it. This does not mean that you as a buyer should throw extreme low-ball offers to see if they stick. A small business is someone’s blood, sweat and tears. The personal attachment to all of that work means that it is relatively easy to offend a seller to the point that they will refuse to work with you. Just as you would like the listing process to be fair – you need to return the favor and offer a fair price. 

 

The message here? Enlisting some professional guidance will be essential in helping you navigate the listing prices of the businesses on the market. Once you’ve determined that a business is what you want – put together a fair and justifiable offer. 

 

Are you just starting your business search and want to know what’s out there? Click here to search for current listings! Would you like to know more about how businesses are priced? Ask us! Please feel free to leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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What Can You Realistically Afford? Thoughts For Business Buyers

We all have big dreams. A bigger house. A nicer car. Lavish vacations. Your own private island. What keeps these wonderful flights of fancy in the realm of dreams is the fact that we just can’t (currently) make them happen.

 

 

Big dreams can become a big problem in the small business market. Why?

 

New buyers will often consider businesses that are completely out of their price range – like drastically so.

 

Why do many new business buyers have unrealistic expectations? It may be, in part, because of the way people buy homes.

 

When you go into a bank to get a mortgage, you might walk out with a pre-approval for $750,000. Does that mean you have $750,000 in the bank in cash? Nope. It just means the bank is willing to loan you that amount because they can take back your new house as collateral if you don’t pay them back.

 

Small business transactions don’t work that way. There are financing options if you don’t have a huge amount of cash available – but that financing is very different than what you see in the housing market. You might be able to get a loan from the Small Business Administration (SBA) or from the seller of the business via seller financing – but no matter where you get your loan you are going to have to put up a large down payment and prove that you have the capital to both get through the transaction process and sustain yourself as the new owner of the business.

 

What do we mean by that? The business buying process can be expensive. If you get a loan from the SBA, they are going to require an appraisal of the business – one you as the buyer have to pay for. There are application fees for SBA, as well as application and licensing costs associated with the licensing requirements for your new business. If your future business is in a commercial space, your new landlord is going to want first-last-security and to see your financials to assure them you can not only pay those initial costs, but be able to pay your rent going forward. You might need capital for payroll in the first few weeks or months. The list can be long and pricey.

 

This doesn’t mean you can’t fulfill your dream of buying your own business. It just means you need to be realistic with what you can afford. If you only have $50,000 to spend, you shouldn’t even look at a business that is $750,000. It can’t happen. What you can do is find an affordable business that you can grow. Smaller, more affordable businesses can be very successful – and have lots of room for that all-important growth.  

 

If you want to know what you can realistically afford, ask an experienced and qualified business broker. They can look at your current financial situation, your goals for business ownership and your previous experience – then assist you with finding the right business to buy. The right business will both meet your goals and keep you from extending yourself beyond what is currently financially possible.

 

Have you always wanted to buy a business but aren’t sure what you could afford? Would you like to know what types of businesses are currently on the market in your price range? Ask us! Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Due Diligence On Yourself – Why Sellers Need To Prep

You might think you are ready to sell your business, but very few small business owners actually are. Do you have all of your books in order? Have you made any necessary repairs?

 

Preparing a business for sale can be a lot like preparing a house for sale. You need to make it look aesthetically pleasing and fix what’s broken.

 

There is, however, one major difference. Due diligence.

 

Once you have accepted an offer from a buyer, the due diligence period begins and you will be opening up your financial records, contracts, leases – everything – for that buyer to inspect.

 

Any problems found during due diligence can lead to one of two outcomes. Either the deal is dead and the buyer walks away, or they come back to you with a lower offer to compensate for the problems they’ve found.

 

No seller wants a perfectly good deal to fall through, and you want to get the best possible price for the business you’ve worked so hard to build – so how do you avoid due diligence issues?

 

Do due diligence on yourself.

 

 

Before a buyer has a chance to peek behind the scenes and go over your books with a fine-tooth comb, you should do this yourself. By performing due diligence on yourself you will see your business through a buyer’s eyes and will be able to address any potential problems long before a buyer finds them.

 

Don’t think you have any issues that will come up in due diligence? Think again. All small businesses have a few skeletons in the closet, and they can’t be hidden. Buyers always find issues, so the best way to deal with this eventuality is to solve the problems before they are found.   

 

How do you do due diligence on yourself? Ask your business broker for guidance and perhaps employ the services of a business transaction CPA. In most cases, you as a business owner know what the problems are. Figuring out the best way to deal with those problems will be where those experts come in handy. Is this an issue you can conceivable solve? How can you solve it? Is it a better tactic to just be upfront with the issues that exist when communicating with a future buyer or try to implement changes that will resolve those issues before the due diligence step in the process? 

 

Performing the due diligence process on yourself will help you and your business to stay ahead of the game during the transaction process and will also help you get the biggest return on your business sale. Ask your business broker for help. 

 

Do you have questions about what buyers will want to see during due diligence? Would you like to know what problems we’ve seen in due diligence in the past? Ask us! Leave any questions or comments and we would be happy to assist you.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

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Buying A Business In The Post-Quarantine Economy

Can you still buy a business in the post-quarantine economy? Absolutely. The keys to success are adaptability and creativity.

 

Everyone can agree that the past few months have been difficult, unprecedented and just plain strange. If you were thinking about changing career paths before the quarantine hit, or if the time trapped in your house made you rethink your life choices – you might be wondering if now is the time to make the switch to entrepreneurship.

 

 

It certainly can be. While some segments of the economy are currently struggling, there are a few key industries that are booming. Think about what people are using/needing and you can come up with a whole host of ideas. Here’s a few:

 

grocery stores

liquor stores

health care and health care supply businesses

waste disposal

cleaning services

laundry

auto repair

delivery services

 

The list of newly named “essential businesses” is a long one. If you were thinking about making the switch to business ownership then a business in the “essential” sector is a good buy.

 

If you had your heart set on a different industry, you might still be able to make it work by adapting your business model and the business you purchase to fit with the times. For instance, if you’ve always wanted to own a restaurant you could perhaps find an existing restaurant to buy and change the model to a take out counter that also offers retail food options like fresh baked bread and other staples – making your business a one-stop shop.

 

The key to success in 2020 is adaptability and creativity. If you have that and are willing to put in the hard work – business ownership can be a very successful path.

 

What about all of the news about struggling small businesses? Yes, there are businesses out there who will not make it back. Many were faltering anyway, or didn’t have a business plan or model that could survive the shut down. The silver lining? Those struggling businesses might be a good buy for future entrepreneurs. Some businesses that have decided to remain closed permanently will likely be offered as asset sales, while those who don’t show the best numbers over the last few months might be purchased for a discounted price. Talk to your business broker about the pros and cons of snapping up a currently struggling business to see if the effort it would take to pull the business back from the brink aligns with your goals for business ownership.

 

Are you considering the jump to business ownership? Do you have more questions about what industries would be a great buy right now? Ask us! Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

www.InfinityBusinessBrokers.com

 

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Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

5111-E Ocean Blvd
Siesta Key, FL 34242




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