Weighing Advice: How Business Buyers Should Deal With “Help”

Posted in Become a Business Owner, Business Broker Why & How, Buyers Articles

Published July 23, 2018

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.

 

 

 

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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Don’t Be That Guy – Why Confidentiality Is Important To Business Buyers Too

Posted in Become a Business Owner, Buyers Articles

Published September 25, 2017

New buyers hate confidentiality.

 

We tell new buyers why confidentiality is important, but they are still frustrated by having to sign non-disclosure forms, having to wait to find out the physical location of a business and by having to visit businesses by appointment and then only after hours. We get it, it is tedious, but it is also extremely important.

 

Invariably we come across a buyer who deals with their frustration by breaking all the rules – by waltzing into a business during business hours and demanding the employees produce the owner so they can talk about the listing price, by telling their neighbors and friends what businesses they have toured – and confidentiality is suddenly out the window.

 

When you first enter the business marketplace as a buyer, the process by which you gain access to information about the businesses that are on the market might seem ridiculous at first, but those protections benefit you too.

 

When a business goes up for sale, confidentiality needs to stay in place.

 

What do we mean by that? We mean that the only people who should know that the business is for sale are the seller, the business brokers and attorneys involved and vetted buyers who have signed the appropriate non-disclosure documents. No one else should have access to that information.

 

“Why? I’m trying to make a major decision here, I need access to the business to see if I want to buy it or not.”

 

Yes, you do need access to information, and you absolutely will gain that access – but it needs to be done carefully to maintain confidentiality.

 

What can happen if confidentiality is breached? Clients go to a competitor, employees quit and take their regular customers with them, vendors cancel contracts and the community assumes that the business is for sale because they are moments away from having to close the doors. If you are trying to buy a business, you don’t want to take the reins in the middle of this confidentiality crisis. You want the business to be in good shape and in good standing with the community the day you take over as owner.

 

An important note here – the impacts of a confidentiality breach aren’t for the business and the seller alone. If you caused the breach, you can be sure that the legal repercussions included in your non-disclosure agreements will absolutely be enforced.

 

How can a buyer ensure the health of the business they are trying to buy? Be patient, and keep the information you learn about businesses currently for sale to yourself. Don’t be “that guy” who causes severe upheaval in someone else’s business. If everyone plays by the rules, businesses stay protected and buyers end up with businesses in great shape.

 

Are you a buyer who is frustrated by confidentiality? Do you have questions about why confidentiality is so important? Please feel free to leave a comment or question here, and we would be happy to assist you with your business buying questions.

 

 

 

 

Michael Monnot

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

https://infinitybusinessbrokers.com

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Do I Have To Sign A NDA (Non-Disclosure Agreement) When Buying A Business?

Posted in Buyers Articles

Published April 27, 2017

The short answer is YES. You absolutely do.

 

 

The NDA (Non-Disclosure Agreement) is a crucial step. It is a legally binding document that protects both you and the seller.  This agreement shields the seller from those who have no real interest in actually buying the business, and protects you as the buyer from a business that may seem fine from the outside, but is hiding major problems.

 

How?

 

In a business transaction, it is necessary for a potential buyer to see the financial records of that business, but a seller does not want to disclose such proprietary information to just anyone. If it is determined that you are a credible buyer, you will be given the opportunity to sign a NDA so that you will have access to the business’s information.

 

The NDA ensures that any buyer who is given access to the financial and/or proprietary information disclosed by the seller will not disclose that information to any party who hasn’t also signed a NDA. This is necessary to keep the for-sale status of the business confidential and protects the seller and the business from potential harm that an inappropriate disclosure might cause. 

 

The parts of a NDA are as follows:

  1. The location, name, and type of business.
  2. The length of the agreement, typically several years.
  3. A list of those who are party to the agreement.
  4. What information cannot be disclosed (like financial records, contracts with staff and suppliers, etc).

 

Any buyer who refuses to sign a NDA is usually considered to be unnecessarily difficult and any business broker worth their salt will refuse to work with you. The NDA keeps the business you are trying to buy safe from those posing as buyers and from the disastrous consequences of a breach of confidentiality. If you consider yourself a serious buyer, be prepared to sign the NDA.

 

Are you thinking about buying a business and are worried about the legal repercussions of the NDA? Would you like to know more about how the NDA is good for business buyers? Ask us! Please leave 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

https://infinitybusinessbrokers.com

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Types Of Business Ownership – Florida

Posted in Become a Business Owner, Buyers Articles

Published March 11, 2012

One of the most important decisions when forming your business is the corporate structure.

 

 

Here’s a look at some of your options in the state of Florida:

 

Sole Proprietorship

If the business is privately owned, in the USA it is a Sole Proprietorship. In the majority of cases this is a single person, who owns and leads the business. Simultaneously the Sole Proprietorship is the most common corporation structure. This type has some downsides. The owner is absolutely liable with his assets. He or she is liable for taxation and it is not easy to receive money for this type of business. He or she also has to apply for a business license.

 

General Partnership

The partners lead this business together and all of the partners are absolutely liable for accounts payable. The General Partnership has more administration effort and is more cost-intensive. Also for this type of business you have to apply for a business license.

 

Limited Partnership

The Limited Partnership consists at least of 2 people, a General and a Limited Partner. The Limited Partner has supervision, available and limited. He can’t be part of the management and acts as an investor. The Limited Partner leads and is liable for the business. A shareholder contract has to be prepared for the forming of the business. Furthermore you have to request a Certificate of Limited Partnership with the Secretary of State.

 

Limited Liability Company (LLC)

The Limited Liability Company is not accepted in all states but it is in Florida. The shareholders are personally liable for taxation and the accountability is limited to the business assets. For the forming of the business the filing documents have to be registered with the Secretary of State. At least two shareholders are required for a Limited Liability Company. Our accountant can inform you about tax benefits for other types of companies.

 

Corporation

The most used type of business for forming a company in the USA is the corporation. By presenting the Articles of Corporation to the Secretary of State, you can carry out the forming of the corporation quickly. Forming the company in Florida, the registered office is also in Florida. The corporate structures are governed by the laws of the State of Florida. The Florida Corporation can carry out business in every state of the USA. All of the states require a registration. Foreign nationals can also form a Corporation in Florida. A registered agent (a person headquartered in Florida) has to be named to receive and deliver mail/documents.

 

Before you make a decision it is important to contact a tax consultant. We can connect you to our partners to make it easy for you to make the right decision.

 

This article doesn’t present any legal advice, but solely serves as general information.

 

Are you thinking about buying a business but have questions about the formation of your business entity? Would you like to know more about the pros and cons of the choices above? Ask us! Leave any questions or comments here and we would be happy to help.

 

 

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Buying A Business – What You Should Know: What Happens When I Find A Business?

Posted in Become a Business Owner, Buyers Articles

Published March 5, 2012

 

What Happens Once I Find A Business I Want To Buy?

 

When you become interested in buying a specific business, we will help in the preparation of an offer or proposal.  This offer or proposal may have one or more contingencies. Usually, they concern financing and a detailed review of the seller’s financial records. They may also include a review of the seller’s lease arrangements, franchise agreement (if there is one), and other pertinent details of the business.  Your proposal will be presented to the seller for their consideration.  They may accept the terms of the offer or they may make a counter-proposal.  You should understand, however, that if the seller does not accept your proposal, you may withdraw it at any time.  We will submit all written offers to sellers for consideration.  Verbal offers will not be presented.

 

When you and the seller are in agreement, we will work with both of you to satisfy and remove the contingencies in the offer.  If you require financing, we can assist you with applications for traditional financing as well as helping to negotiate terms and conditions of seller financing when available.  It is important you are prepared to work quickly and efficiently in this process.  Infinity Business Brokers highly recommends you bring in outside advisers to help you review the information. When all the conditions have been met, final papers will be drawn and signed.  Once the closing has been completed, you will take possession of the business.

 

As your business broker professional, we will work with you throughout the entire search and sales process.

 

Do you have more questions about the steps after an initial offer is accepted? Would you like to know how an offer is put together? Ask us! Please leave questions or comments and we would be happy to help.

 

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Buying A Business – What You Should Know: What Paperwork Is Required To Buy A Business?

Posted in Become a Business Owner, Buyers Articles

Published March 5, 2012

What Paperwork Is Required To Buy A Business?

 

 

To buy a business you will likely need to complete several documents.  These documents include a buyer profile, a non-disclosure agreement, proof of financial viability and a summary of experience.  Providing a buyer profile, proof of financial viability and a summary of experience to the broker prior to the start of a search can expedite the process and save you a lot of time.  The broker has spent considerable time learning about the business for sale and documenting the key facts, it is only fair to the seller they document the key facts regarding prospective buyers.

 

A buyer profile is a one-page summary listing your name, contact information, industry and location preferences, owner benefit required, cash available for down payment, timing, key decision-makers, and other critical information about you, the buyer.  A broker may ask you to complete the buyer profile, or they may complete it for you over the phone or in a face-to-face meeting.

 

A non-disclosure agreement (NDA) protects the seller and broker for a specified period of time.  These protections include:

 

1.      Assures you work through the broker and not directly with the seller.  Respect the fact the seller hired the broker to communicate with, and qualify, all prospective buyers.

2.      Informs the buyer all documents containing non-public information are considered confidential and the buyer is responsible for maintaining this confidentiality.

3.      Advises the buyer to seek the advice of their own attorney and/or CPA when purchasing a business as the broker is communicating information on behalf of the seller and cannot guarantee the accuracy of this information.

4.      Informs the buyer should they consummate a deal with the seller and/or landlord without the broker’s involvement within a two years of signing the NDA, they will be liable for damages including commissions due the broker.

5.      Warrants the buyer is acting on their own behalf and not as an agent of a third-party, government agency or competitor.

 

A signed NDA allows you to receive a business summary, also refered to as a BLI, or Business Listing Information sheet.  A signed NDA does not permit you to receive the name and/or address of the business.

 

Proof of financial viability is a critical step.  Experience has shown less than 25% of all buyers have the necessary liquidity and/or available funding to purchase the business they are inquiring about.  Sellers have little patience sharing time and confidential information with buyers who do not have the financial means to purchase and operate their business.  Most sellers require their broker to have prospective buyers verify financial viability.  This can be accomplished by one of three methods:

 

1.      Complete and sign a personal financial statement.

2.      Producing a letter from a CPA or other fiduciary stating you have a specified amount of liquid capital and/or access to a specified amount of funding or they have looked at the terms and conditions of the sale and assure you are qualified.

3.      Statements from a bank, retirement or other savings account.

 

A summary of experience can be provided to a broker in written format, e.g., a resume, work history or other similar document, or verbally during a phone call or face-to-face meeting.  Most sellers want to be reassured by the broker the buyer has the experience and skills to successfully operate the business.  The more you share about your skills and experience, the better the broker can represent your interests to the seller.

 

Only after the broker has accumulated the necessary paperwork from the buyer and believes they are qualified to purchase and operate the business, will the broker and seller feel comfortable in releasing the name and address of the business.

 

Are you looking at businesses to buy and have more questions about the process and what will be required from you? Would you like to know more about the NDA? Feel free to leave us any comments or questions here.

 

 

 

 

Michael Monnot

941.518.7138
Mike@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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