Questions to Ask the Seller & Yourself Before Buying a Business

We’ve listed these questions for use
as a readiness guide for a Business
Buyer who is evaluating a purchase
opportunity with a few reflective
questions, thrown in for good measure.

Please email if you’s like to suggest another question for the list!

 Questions the Buyer Should Ask The Seller

The Business

  1. How long has the business been in operation?
  2. Where is the business located?
  3. Does the business have a good reputation? (check social media reviews, BBB, etc.)
  4. Are the product and services attractive and legal?

The Seller

  1. Who much does the seller take in salary? Benefits?
  2. Is seller financing available?
  3. Why did the Seller start or buy this business?
  4. Why is the business for sale?
  5. Will the Seller stay on as an employee or exit after the transition?
  6. Is the seller willing to agree to a non-compete?
  7. Is the business highly dependent on the personality of the owner, or is it fairly independent from the owner?

Financial

  1. Does the business have a written business plan?
  2. In what condition are the business’s financial? (Tax returns, P&L, Owner Recollection?)
  3. Can the owner provide 3 years of tax returns and financial statements to support sales and owner benefit? If no, what prevented them from doing so?
  4. Is this a “cash heavy” business? Is this business capturing cash sales?
  5.  Are sales steady, increasing or decreasing? Why or why not?
  6. Are margins and profit steady, improving, or decreasing?
  7. Are there any liens or judgments against the business?
  8. With whom and for how much is the business indebted?
  9. Are their issues with suppliers and/or customer needs and demands that would effect sales or costs?
  10. How much working capital is needed to operate for 30-,60-, 90-days?
  11. Does the company have a good credit and reputation with suppliers?
  12. Are there “holes” in the financials? If yes, is it a result of fraud, poor book-keeping, or another problem.
  13. What makes up the owner benefit?
  14. How does the business earn revenue? Are there single or multiple revenue streams
  15. How quickly does the business get paid after delivery of products and/or services?

Legal

  1. Are there any ongoing lawsuits or concerns?
  2. Have the seller provide all contracts relevant to operating the business: employee, leases, service providers, client contracts, etc.
  3. What zoning or industry regulations for the location? are there anticipated changes that could affect the business? If the business is relocated, what are the zoning requirements?

Market

  1. What is the geographic or virtual marketplace?Who are target customers and is the market growing, stable or shrinking?
  2. Who are target customers and is the market growing, stable or shrinking?Is there a client concentration If so, what would happen if that/those clients left?
  3. Is there a client concentration If so, what would happen if that/those clients left?Who are the seller’s major competitors? How does this business separate itself? What further opportunities exist for further
  4. Who are the seller’s major competitors? How does this business separate itself? What further opportunities exist for further diversification?
  5. Are there any untapped or untried expansion opportunities already known?

Sales and Marketing

  1. What are the trends and outlook for this industry and this business?Does the business have a written sales and/or marketing plan?
  2. How is this business currently selling its products and/or services?
  3. How does the business find new customers?
  4. Are the current relationships in jeopardy should there be a new owner?
  5. Will demand for the services and products continue after seller exits the company?
  6. Will key sales and service personnel stay under a new owner?
  7. What sales initiatives have recently worked well? Not worked well?
  8. What are the most and least effective marketing campaigns int he last 2 years?
  9. Is the business cyclical or seasonal? If yes, describe.
  10. What are the next full years’s projected sales?
  11. If sales are rising, is the increase due to growth in the market or to raising prices?

Procedures

  1. Does the business have a written Procedures Manual?Does the business have an emergency procedure in place?
  2. Does the business have an emergency procedure in place? Are any procedures proprietary?
  3. Are any procedures proprietary?
  4. Are employees cross-trained?
  5. How do you train your employees? Internally, outside training and education, mentoring?
  6. Are there any licenses required to do certain jobs? Detail the requirements.
  7. What opportunities are there for process improvements? Are there any neglected investments in innovation and technology?

Assets

  1. If the transaction includes A/R, how is the aging and concentration of those accounts?
    I the transaction includes inventory, how much is obsolete? Do they have a current inventory list with values? If the transaction includes equipment, what is the current value and condition? Is any equipment in need of repair or replacement?
  2. If the transaction includes equipment, what is the current value and condition? Is any equipment in need of repair or replacement?
  3. Will any intellectual property, proprietary processes or exclusive products ownership rights transfer to you?What is the total goodwill included in the sale?
  4. What is the total goodwill included in the sale?Does the business own or lease its space? Is a lease assumable or is the landlord open to negotiating with a buyer? If the seller owns the building, is the property included in the sale or is is available for lease?
  5. Does the business own or lease its space? Is a lease assumable or is the landlord open to negotiating with a buyer? If the seller owns the building, is the property included in the sale or is available for lease?What is the company’s reputation? Does the sale include phone number, email addresses, website, and other social media?
  6. What is the company’s reputation? Does the sale include the phone number, email addresses, website, and other social media?Are licenses, permits and/or certifications from industry organizations current and posted?
  7. Are licenses, permits and/or certifications from industry organizations current and posted?What special licensing or permits are needed, if any, for this business?
  8. What are special licensing or permits needed, if any, for this business?
  9. What types of insurance policies are in place? Can you take over the policies as part of the sale?

Suppliers

  1. Are the suppliers willing to transfer the existing contracts to you when you take over the business? Is the seller willing to make a personal introduction to the buyer during the transition?
  2. Does the business have multiple suppliers or just a few?
  3. Is the price of goods and materials steady, increasing or decreasing? What is causing these changes?
  4. What inventory levels does the company maintain? Too much can be a sign that the company is struggling to move product or is spending too much maintaining inventory.
  5. How many turns occur per year, and what is the industry average?

Employees

  1. Is there a written HR/Employee manual?
  2. How many full and part-time employees are currently working with the business?
  3. Are any or all employees leased or 1099?
  4. What employee benefits are offered? How much do they cost? Who is the providerDoes the business have many long-term employees or is there high turnover?
  5. Does the business have many long-term employees, or is there high turnover?
  6. Describe what positions are key in the company. Who currently holds those positions and what are their duties? Are key employees staying after a change of ownership?
  7. Are any seller’s relatives or friends employees? What roles do they fill? Will they stay or leave after the transition?
  8. What is the company culture like?
  9. Is there a current succession plan in place for key employees?
  10. Detail bonus and commission plans?

Questions the Buyer Should Ask Themselves

  1. Am I just in this for the money?
  2. Do I really want to do this all day? Am I interested in this industry?
  3. What is the best way to finance this?
  4. Do I feel the Seller is truthful and someone I am comfortable working with during the transition?
  5. As I consider this purchase, what is my exit strategy? (It is never too early to ask this question.
  6. How much cash am I prepared to pay up front?
  7. Can and do I want to obtain bank or third-party financing? How much capital will I need to finance or raise? (Sales Price – Cash Deposit – Seller Financing = Capital Needed).
  8. Will current cash flow cover debt service? How much working capital does the business need on Day 1?
  9. Why should I buy a business and not just start one from scratch?
  10. Do I want to manage the business full time or operate it as an absentee owner? Ho many hours do I want to work a week?
  11. Will my family work in this business? Will they be interested in taking the business over one day?
  12. What will I need during due diligence to reassure me that this is a good opportunity?
  13. What is my gut telling me about this opportunity? Is the risk in this business something I am comfortable managing?
  14. How much money will I need to draw out to business immediately? Can the business support that?

This article shares a fairly comprehensive list of items needed in due diligence. Remember, not all items are needed and some things you need may not be listed.

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Why Invest in Commercial Real Estate?

Return on Investment (ROI) is the buzzword of any type of investment. In today’s financial world ROI for your bank account is minimal, if at all. Some put their money into a savings account, cd or bond; others buy residential homes or commercial real estate. With the global investment market still in turmoil, the later of those investment vehicles are a tangible way to get a much higher return on your investment dollars.

Why are the returns greater? If you are making a minimal percentage on your savings, and CD’s, and your bonds are fluctuating due to market conditions; real estate (commercial specifically) is a way to put that money to work. For the past 20 years commercial real estate investments have outperformed the S & P 500 index! For generally a 20% down payment, (slightly more if you are an overseas buyer-but, YES you can buy too and get some help in financing!) you build your net worth, experience cash flow and reap the rewards of positive cash on cash returns.

Although this is considered an illiquid investment, the positive benefits financially include depreciation and tax deductions. These vehicles let you reap the benefits of increased cash flow. Upon the future sale of this investment, you can utilize a 1031 exchange so any capital gains can be pushed to a later date.

There are many types of properties to invest in and different ways to do the investing. Purchasing a property outright gives you the ability to manage (or hire someone like me) to do the managing for you. You would direct the operations, maintenance and maybe improvements to the property. However some utilize REIT (real estate investment trusts), you become a shareholder in the property and you should receive a dividend based on the shares you buy. Some people even get their own small group together and create their own investment group in order to invest in commercial real estate.

Let me help you find the right real estate investment for your needs. FBX Commercial, Inc. has the ability to help you locate the right investment, help you negotiate the deal and be able to help manage the property. Call Trish Walden, CCIM, BROKER at 321-277-6429 to meet and discuss investing in commercial real estate.

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SALES!

Two major investment properties sold in the month of May.  Trish Walden, CCIM represented the seller in the sale of 1700 Kelley Ave.  1700 is a multi-tenant business industrial property in Kissimmee. It sold for approx 8.5 Cap rate!

The other sale is a Sale/Leaseback in the Quadrangle near UCF. Twenty thousand s/f of leased space, sold in the 8.7 cap range. Trish Walden, CCIM represented both sides in this transaction.

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Businesses Getting Record Sales Prices in Q1 2016

According to BizBuySell.com, an increased number of small business owners are cashing out and getting record sales prices on their exit plans, according toBizBuySell.com’s latest quarterly Insight Report. The BizBuySell Insight Report is a nationally-recognized economic indicator that tracks the health of the U.S. small business economy. It focuses on sales and listing prices of owner-operated small businesses in over 70 major markets across the United States with less than $2 million in sales.

Each quarter, BizBuySell, one of the largest online business-for-sale marketplaces, analyzes data on sales and listing prices of approximately 45,000 small businesses listed for sale on its site and those recently sold in the year. It then publishes the findings in its quarterly Insight Report.

The latest Insight Report shows that the number of businesses listed for sale grew more than 6.4 percent in Q1 of 2016, making it the highest number of businesses listed for sale on BizBuySell.com since the first quarter of 2009.

Moreover, the median asking price for small businesses listed for sale rose 11 percent in the past year to $249,500. The median sale price increased 10 percent year-over-year from $200,000 to $220,000, the company said in its report.

According to BizBuySell, those businesses that sold in Q1 of 2016 had the highest median revenues and cash flows in its records. The median revenue of sold businesses in Q1 of 2016 was $478,000 compared to $442,000 last year, and the median cash flow in Q1 of 2016 was $110,000 compared to $104,000.

These strong financials and sale prices may encourage more small business owners to cash out.

Why Now May Be the Right Time to Cash Out

The high volume of activity in the business-for-sale market revealed in the BizBuySell Insight Report can be attributed to a variety of factors, including improved lending options and a strengthening U.S. economy.

Other variables are also playing a role in attracting both buyers and sellers to the marketplace. First, Baby Boomers are supplying the market with quality listings of small businesses for sale as they reach retirement age. Secondly, many small businesses are reporting stronger financials, meaning buyers are more confident about purchasing and are even willing to pay more for healthy businesses.

Now with improved borrowing conditions and greater access to funding for prospective buyers, your businesses’ solid financial condition and documentations showing a healthy growth trend may be your cue that conditions are right to cash out.This is especially true if you have a small business in the retail, restaurant or service industries and have been looking to sell the business, BizBuySell says.

Contact us today to schedule a complimentary consultation and business valuation. Email fbxcommercial@gmail.com or call (407) 718-8955.

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Real Estate / Business Tactics

Strategic thinking is an activity used when starting your business or buying real estate.  Whether conscious or unconscious, that analysis contained a  step-by-step processes, or it was an intuitive direction taken because it just made sense. Either way, here you are.  It is helpful to have a plan in place to now guide you towards your future, be it expansion, contraction, or creating that exit strategy.  This is the way you can view any challenges or opportunities within your company or  property, and understand the future with implementable solutions toward your goal.

In business. regardless of the type of company you have, there is a way for you to make a conscious decision, what happens next.  Utilizing strategic thinking outlined in your plan allows you to manage information in a way that benefits you financially and emotionally.  The creates ways to maximize profits through evaluation and allocation of resources.  Do you own or lease the building?  Is it time to monetize that investment?  Is the rent at a market rate? Utilizing your own skills or the skills of a trusted advisor, you can develop peripheral vision (the ability to detect trends and signals outside your current “tunnel vision”); think critically to reframe issues and beliefs; intepret available inforamtion to develop your viewpoint; align concensus within your group; and continue to learn and shift.

Have strategies for your Company with the following steps:

  • Analyze the internal workings of your business and the real estate market and understand the processes and cycles. Included here is know the value of your business you have grown and the real estate cycle in which your property is categorized.
  • Utilize your understanding to develop a strategy to go forward with a plan for future growth, expansion, or disposition.
    • Identify rewources, advisors, and budgets highlighting aeas that need support.
  • Exeucte the plan.
  • Evaulate the management of the plan.

You are not alone, FBX Commercial, Inc., a professional Business and Commercial Real Estate firm, can strategize with you. We offer a complimentary consultation.  Let FBX help you work through the opportunities and strategies.  Call me, 321-277-6429; or email me at TrishWaldenCRE@gmail.com

 

 

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Orlando Among Top Commercial Real Estate Markets in the U.S.

orlando-skyline

The Orlando Business Journal reports that in more than 80 markets across the U.S. Orlando ranks #2 based on the percent change in vacancy and rental rates for the office, retail and multifamily sectors from third-quarter 2014 through third-quarter 2015, as well as population and unemployment changes over the same time period.
FBX is seeing an uptick in industrial, free-standing offices and small business leasing.

Contact us to find your perfect location!

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After 7 Years, Industrial/Retail Property Finally Fully Leased

PRESS RELEASE

 FOR IMMEDIATE RELEASE

After 7 Years with Vacancies, Industrial/Retail Property Finally Fully Leased
FBX Commercials Leasing Veteran Lisa Schummer Successfully Steps In

Winter Garden, FL, January 22, 2016 – – FBX Commercial’s Lisa Schummer has successfully fully-leased the 91,734+ sq. ft. Winter Garden Business Park. The resurgence of the Winter Garden submarket is real. Seven (7) spaces, totaling 18,461 sq. ft. were leased to both local and publicly traded companies within a year.

“Lisa and FBX Commercial did a fantastic job in locating high quality tenants, juggling multiple deals and prospects, and truly understood our needs. Their ability to creatively create win-win partnerships brought out asset to full occupancy.” stated Christopher Balish, President & CEO of Adler Realty Services.

Winter Garden Business Park is a flex/office and retail business park located just south of Colonial Dr. (Hwy. 50) on Winter Garden Vineland Road. The business park is owned by Adler Realty Services in Miami, FL.

About FBX COMMERCIAL: Specializing in commercial real estate sales and leasing, FBX Commercial, Inc. was founded to expand an established business brokering company, FBX Brokers, Inc., operating throughout the state of Florida for over 25 years. Trish Walden, CCIM, and Bert Risdon, CBI, respectively lead the companies with over 60 cumulative years of professional real estate and business brokering experience. The commercial specialists at FBX Commercial working as a team for each client offer superior service and expertise in commercial investments, leasing, property sales, long-term planning and consulting.

About ADLER GROUP: With over 50 years experience, Adler Group and its affiliates offer a seamless network of realty services designed to maximize the value and strength of real estate assets. Throughout its history, Adler Group has developed and acquired in excess of 18 million square feet of industrial, office, retail and residential real estate.

# # #

For further information, please contact:

Lisa Schummer, Commercial Associate

FBX Commercial, Inc.

Email: LisaSchummer@gmail.com

Tel: (407) 592-5167 mobile

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FBX Commercial, Inc Women Build 2016

2014-WB-logo
Please join FBX Commercial, Inc. and Habitat for Humanity by donating to a worthy cause.

We have promised to raise at least $3,500 to support Habitat for Humanity during the 2016 “Women Build” initiative to take place in May.

We happily support Habitat for Humanity and their desire to build a sustainable live, work, and play community. Join us TODAY! And thank you for your support!

Join us or donate by clicking here.

Women-Build-logo

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How Do You Know What a Good Commercial Rental Rate is?

As a Commercial Broker, Business Broker I am asked to find space with the “best” rate. Well, rental rates are an integral part of operating your business. Businesses usually look at the total monthly figure, but have you taken into account the total costs over the rental period?

For every dollar earned by your business, you are spending it in three categories: Cost of Sales (any/all expenses to purchase and/or produce your business goods and services); Operational Expenses (any/all expenses to run your business that sells the goods or services); Miscellaneous Expenses (i.e. Tax/interest or not classified by cost of sales or operational costs). Keeping expenses in check keeps your business revenues growing and the business paying you and your shareholders.

So is there a rule of thumb when figuring how much rent is too much? Retailers use rent-to-sales ratio, and can vary depending on the type of store, and vary from 1.25%-just under 9% while restaurants look at the 8% ratios. Professional and technical firms, on average, spend about 2.5% while small manufacturing firms can be in the 2.75% ratio.

When I work with tenants I explain how they have to look at the entire cost of occupancy. When designing a lease the entire cost of the space also includes property insurance, maintenance and real estate taxes, and advertising costs (large power centers and malls have a category split among tenants for this) any costs the landlord is willing to offer as tenant improvement dollars and free rent time. So even though these are business expenses, they are not built into your rent to sales ratios! However, you need to include them in your look at the cost for space. When figuring total rent, all amounts paid to the landlord over the given lease period should be brought back and figured into an overall price per square foot. This is never the advertised price, but one negotiated as a package. That way you know what your total cost for space is and how that impacts your bottom line.

Next time, lets discuss types of leases…they come in different forms; Full Service; Triple Net (NNN); Modified Gross (usually industrial); Percentage Lease (usually base plus a % of revenue earned and mainly used in shopping malls).

Does this help? Lets work together on finding the right space for you, or the right business to acquire!

 

 

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Selling a Business? Do YOUR Due Diligence!

Due Diligence Most information and “How To” articles available about the due diligence process for a business sale are written to the benefit of the Buyer.  However, when a Seller is prepared for the due diligence period, it can be anticipated that the process goes more smoothly, is less strained, and the perceived transparency improves communication prior to and during closing. While this list is by no means complete, it provides a good outline of what you should provide to your broker during the listing process and prior to a Buyer Offer. The more information provided upfront helps with setting a price for you business, improves accuracy when marketing, and could possible save time fulfilling requests for information later. The more your agent/broker knows about your business upfront helps them be the best advocate for you during the sales process.

 

COMPANY DOCUMENTS

a) Articles of Incorporation and Amendments
b) Licenses, Certificate in Good Standing
c) Same for all DBAs or other trading names
d) Shareholders names and numbers of shares held

 

FINANCIAL INFORMATION

1. At least three years (when available) of the following:

a) Profit & Loss (Income) Statement
b) Balance Sheet
c) Current Inventory List
d) Business Tax Returns
e) Owner’s Personal Tax Returns (to support income and distributions)
f) State Sales Tax Returns
g) Employment Tax Returns

 

2. At least 12 months of the following:

a) Payroll Reports
b) POS Reports
c) Merchant Statements

 

3. Other Reports

a) Accounts Receivable and Accounts PayableProjections, Business Plan
b) Inventory Report
c) List of Employee names, positions, salary or rate of pay and hire date
d) List of any tax license) Receipts and Warranties for equipment purchases
f) List of liability, property and other insurance coverages and contact information for the Insurer.
g) List of professionals and contact information (lawyers, accountants, consultants, etc.)

 

ASSETS

a) List of UCC Filings
b) Equipment Leases
c) Benefits Policies (Employees)
d) List of Pending Litigations
e) List of Unemployment Claims
f) Copies of stock options (if any)

 

REAL ESTATE

a) Rental/Lease Documents
b) Copies of Deeds, Mortgages
c) Variances/Permitting
d) Recent Appraisals and/or surveys

 

INTELLECTUAL PROPERTY

a) A list of copyrights, trademarks, patents and trade names
b) Employee and Operation Manuals
c) Employee non-compete and/or “Work for Hire” agreements

 

CUSTOMER INFORMATION

a) List of the 20 largest customers and sales volume for last 2 years
b) Copies of applications, credit policy, purchasing policies and coupons and special offers
c) List of major competitors

 

Should you have any questions prior to selling your business, we welcome your inquiry. Email us at info@fbxcommercial.com and we’ll respond within 24 hours.

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