Richard J. Green

    • Member Type(s): Expert
    • Title:Business Broker
    • Organization:Green & Co. Business Brokers
    • Area of Expertise:Business Broker

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    Pitfalls To Avoid When Purchasing Commercial Property With A Business

    Monday, July 15, 2019, 10:04 AM [General]
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    Many businesses that are for sale have commercial property attached to the deal. Purchasing a piece of commercial property in conjunction with purchasing a business is something that adds an additional layer of complexity, but your Broker will be equipped to help guide you through the process. There is a Commercial Real Estate Contract that will need to be executed, in addition to the Business Asset Purchase Agreement. The Due Diligence period will also need to include items relating to the commercial real estate transaction. We’ve outlined the most common items that can potentially cause issues in a commercial real estate transaction, but by no means is this a complete or exhaustive list. 

    Title or survey concerns. 

    The Seller will be expected to provide the Buyer with their current title insurance policy, as well as the most recent survey done on the property. If there isn’t a recent survey, then the Buyer will need to order one as part of the closing process.A title commitment will be given to the Buyer, once the title company or insurance company has completed all of their searches. A thorough review of the title commitment and all of the documents referenced in it is critical. Some title concerns may include: mortgages, liens, judgments or assessments against the property, probate issues, pending lawsuits or foreclosure suit. The Commercial Contract will provide a Buyer with a period of time for title review. Please note that it is normal for title companies or closing attorneys not to do their searches and provide title commitment until after the Due Diligence period has been completed, because many deals will fall apart during the Due Diligence process. The survey should be ordered as soon as possible after the contract is signed and should be reviewed in conjunction with the title commitment. This allows a Buyer to determine if there are easements, encroachments, or other matters that need to be addressed.

    Verify zoning and land use. 

    The Buyer will want to make sure that current zoning and land use classifications allows them to use the property as they intend to. Buyers should also find out the permitted uses for adjacent properties as well, if possible. A Buyer can request a zoning verification letter from the applicable municipality to obtain valuable information as to the pertinent zoning and code related matters. Making sure that the property can legally be used as intended is one of the most important things to verify during the Due Diligence process. If someone is buying commercial property that is owned by the business they are purchasing, the current owner would be responsible for making sure that it is operating legally, so any zoning issues should hopefully be able to be cured by the Seller before closing. If there are zoning issues that are not curable, then the Buyer would have the right to cancel their contract and receive their earnest money deposit back. 

    Environmental Concerns.

    It is important for a Buyer to identify if any environmental concerns exist at the property. Especially if it is an industrial site or a commercial property that has dealt with hazardous waste, like an auto repair or body shop. If there are questions of environmental concerns, a Phase I Environmental Assessment should be obtained. Depending on the results of the Phase I report, a Phase II or Phase III Environmental Assessment may be required. Do not assume that because the property has never been used as a gas station, dry cleaners, or other type of business that has a higher likelihood of contamination that there are no environmental concerns with the property. These environmental inspections and assessments should all be done during the Due Diligence Period. 

    Issues with liens, expired permits, or licensing.

    Buyers will want to investigate if there are any code enforcement liens, expired permits, unsatisfied development or easement obligations, unpaid municipal liens for such things as water, electricity, sewer or gas that may create potential legal liability for the new owner. The title company or closing attorney will do a search for liens, but it doesn’t hurt to personally look into all of these items individually. Also, if the business has complex licensing, like liquor licenses, there are professionals who specialize in helping Buyers verify and obtain the proper licensing to operate their business. When purchasing a business along with commercial real estate, the Seller agrees to assist the Buyer, at Buyer’s cost, with getting all of the licensing in order. If a Buyer doesn’t know all of the licensing required to operate the business they are purchasing, the Seller will always be one of the best people to ask, since they know what licensing they have been required to have. 

    Physical inspections of the buildings, equipment, and property.

    Are there any major issues with the building, roof, electrical, plumbing, fire sprinklers, elevator, HVAC, etc? Buyers should obtain inspections completed by licensed and insured professional inspectors, so they can evaluate any repairs that may be required. If repairs or replacements are needed, the buyer would then want to get quotes from appropriate contractors, so that they are aware of what those costs might be. Those quotes or estimates can then be used to go back in and re-negotiate with the Seller. If the repairs need to be done to legally comply with code or permitting, then the Seller will most likely need to make those changes before closing, since they are contractually bound to make sure that the business is operating legally. If the needed repairs are health and safety-related, then it might be something for the Seller to consider fixing before closing as well. At the end of the day, commercial property is sold as-is, so the Seller doesn’t have to agree to repairs (unless they are not currently operating legally), but the Buyer can always ask for repairs or a reduction in purchase price, so that the Buyer can make the repairs after closing. Sellers are most likely not going to agree to cosmetic improvements or repairs that aren’t health and safety-related. 

    The Buyer is ultimately responsible for doing any and all Due Diligence on the business as well as the commercial property, and they have the option to get other professionals involved to assist them, such as a CPA, attorney, building inspector, license expert, etc. It is then the Buyer’s option to either re-negotiate, cancel the contract, or move forward, lifting the Due Diligence Contingency. The Broker will be able to help with that portion of the process...

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    The Importance Of Getting The Asking Price Right

    Tuesday, July 2, 2019, 8:17 AM [General]
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    There is a lot of work that goes into pricing a business, and our Brokers spend a great deal of time and attention on the financial recast and researching comparative sold businesses, so that we can recommend that our Sellers list their businesses at the most realistic selling price. We don’t want to just list businesses for sale, we actually want them to sell, which is exactly what our Sellers are hoping for too. In order to successfully sell a business, the most important factor is to get the asking price right, from the very beginning, and here’s why.

    Increase your chances of selling.

    The statistic that we are given by our professional association is that only 1 in 4 businesses in Florida that are listed for sale will actually sell. 1 in 4! Those odds aren’t great for a business owner who is hoping to sell their business and cash in on all of their hard work. Of course, businesses don’t sell for a number of reasons, but what we have found is that most businesses on the market that are just sitting there and not ever selling are priced incorrectly. Why go through all of the effort to get it valued, have it listed, and then never sell it because the asking price is unrealistic? It doesn’t make sense to us either. That’s why we work so diligently to get the asking prices of our listings to the most probable price that it will actually sell for. First and foremost, we are always honest with our Sellers, and we sometimes have to be the bearer of bad news that a Seller doesn’t want to hear: their business isn’t likely to sell for what they were hoping for. However, we will work as hard as we can to get them the most money possible for their business. If you really want to sell or in many cases, need to sell, then setting your list price correctly will more than double your chances of finding a qualified buyer and closing the deal...

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    Grow Your Business Via Acquisition

    Tuesday, June 25, 2019, 11:36 AM [General]
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    There is no better way to expand and grow your current business, than by purchasing another existing business to merge with your own. We will outline the top 5 reasons why growing via acquisition is one of the smartest decisions you could make to push your business forward. 

    1. Fastest way to grow your business.

    Instead of adding new customers the old-fashioned way, 1 by 1, transaction by transaction or visit by visit, if you purchase a business that has a large existing customer base, then you will be able to grow your business (and hopefully your sales too) by a much higher multiple and much more rapidly, than by just working on gaining a few customers at a time. When you buy an existing business, not only do you get their customer database, you are also buying the goodwill and reputation of that business, as well as all of its assets. You should be able to take what that other business has already started, add it into your business, and launch yourself to the next level. 

    2. Immediately increase your bottom line.

    Rather than spending thousands of dollars on an upgraded advertising or marketing budget, in the hopes of capturing some new customers, acquiring an existing business that has a consistent history of positive cash flow will add to your profit on day one. If a hypothetical business is making $100,000 per year in owner benefit or seller’s discretionary earnings, then you should be able to easily add that onto your own owner benefit. Also, to take that owner benefit to the max, you could possibly absorb or erase some of the expenses that business has, and increase your bottom line even more. For example, if you already have an existing office with staff to run it, then you can just absorb the business operations into your existing structure, and eliminate those expenses entirely, adding even more profit to your numbers. So, in the end, the $100,000 in owner benefit per year in our hypothetical example could actually become $170,000 per year once those rent and payroll expenses are added back in. Also, you can even use leverage to purchase this new business. SBA backed loans for business acquisitions tend to be easier to get approved for, when the applicant is a business owner who already has a successful business in the same industry. In the right situation, acquiring a business to grow your own could make perfect financial sense.

    3. Add complementary businesses and diversify your offerings.

    We see this happen a lot in the construction industry. A general contracting company ends up subbing out a lot of their work to specialty companies, like roofing, plumbing, and electrical contractors. Many smart business owners have figured out that if their parent company could offer all of these contractor services, and keep all of the work “in house,” that they can get an even bigger piece of the profit. This also works for other small businesses too. Let’s say you have a lawncare company. If you are already going to houses once a week to cut their grass, do they have a pool you could clean as well? In one trip to the same customer’s home, you could double your sales by offering both services. Or you might own a pet shop, that is a retail outlet, but you wanted to add more services. You could purchase a grooming salon or mobile groomer and cross promote through both avenues of revenue. The options and examples here for business owners to diversity are truly endless, and in most cases, it just makes sense to sell more items or services to the customers you already have. 

    4. Add locations to cover a bigger geographical area.

    Your business might be dominating in your specific location or area, and you are serving as many customers as you possibly can. Business is booming, and you’d like to grow, but are limited, due to geography. This is an ideal situation to have, because all you need is another location in a different area, so you can cover more ground and capture a whole new population of customers. Buying an existing business that is in your industry, in your new target location is the fastest and easiest way to hit the ground running, and instead of starting from scratch, waiting for the profits to outweigh the expense of adding a new location, you can continue running the business you purchase, taking in profit as you transition that business into the successful brand that you’d like to replicate. You already have the blueprints from your first location, you just need to tailor this existing business to your design. 

    5. Take out your competition. 

    Competition in the marketplace is a struggle for most businesses. However, what if you could not only grow your business quickly, but eliminate the competition in the process? If you bought out a competitor, you would essentially be killing two birds with one stone. You’d have the benefits of acquiring an existing business: getting their customer list, buying their tangible and intangible assets, and reducing their operating expenses by absorbing some parts of their operation into your current business, but you would also eliminate that business as a competitor, which would hopefully work to increase your sales exponentially. 

    If you are thinking about possibly growing your business via acquisition, we have buyer specialists on our team who are dedicated to working exclusively with our clients who are looking to purchase a business. As a business buyer, you would pay zero commission to us for our brokerage services, which is a great perk for you. Give us a call today…we’d be happy to help!

    When Is The Right Time To Sell Your Business?

    Tuesday, June 18, 2019, 8:27 AM [General]
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    s your geographical area or industry growing or experiencing a boom? That’s a great sign that it’s time to sell. Many people wait until they are exhausted and ready to retire or their business is on the decline to sell. Ideally, that's the exact opposite of what you should do. You want to sell when you are at the top of your game – peaked out. Some will say, 'I'm making good money now. Why should I sell?' That's thinking like a business owner, not an entrepreneur. Below we will discuss 5 situations that would suggest that now is the time to think about your exit strategy. 

    1) Your Business Is Performing Well

    Your business is at the top of its game. You are making more money than ever and operations are running smoothly. It’s time to set the cruise control, and just ride this wave of success, right? Maybe, but not necessarily. The absolute best time to sell a business is when the business is doing well, and when it has been doing well consistently for the past few years. Buyers want to see a solid track record of good owner benefit. When valuing a business, we typically look at the last 3 years of financial records, but a buyer will often request to see the last 3-5 years during Due Diligence. If you are an entrepreneur who likes to move from one project to the next, you know there is no better time to sell than while you are on top. Anything unexpected can happen to a business, which could possibly drag it down, so that’s why cashing out while things are good can be the best thing a business owner could do, especially if you are thinking of getting out in the near future. 

    2) You Are Preparing For Retirement

    If you are starting to think about retirement, and how nice it would be to have the freedom to enjoy this next chapter of your life, just those thoughts alone should be enough to start exploring your options for an exit strategy. So many hopeful retirees that come to us for assistance to sell their businesses are tired, burnt out, and have waited too long to pull the trigger. In some of these cases, they have taken their foot off the gas, and the business profits have slowly been declining year after year, which in turn, makes the eventual sales price of their business lower. The business owners who approach us early, maybe a year or two before they are ready to retire, end up being in a much better position when it comes time to sell. We help them optimize and prepare their business for sale, which then gets them top-dollar for their business from a buyer. 

    3) You Have Health Concerns

    Unfortunately, we see this scenario more often than we would like. A business owner has received some bad news relating to their health, and they need to concentrate on getting better, rather than running their business. This is a tough one, because you don’t want to jump the gun and list the business for sale before you even know what you are really dealing with, in terms of the illness or injury. However, the worst-case scenario would be waiting too long, until you can’t run the business any longer, and you are forced to close the doors, rather than sell and get rewarded for all of the hard work you’ve put into your business. A medical situation that we have repeatedly seen is a business owner with either a high-stress or physically demanding business, being advised to make changes by their doctor. In those cases, we can sell their current business, and then, if they want to continue working, we have helped them purchase a business that is more “hands off” or less demanding. If you have questions about selling due to a medical reason, we are here to help during this challenging time. 

    4) Your Geographical Area Is Growing or Your Industry Is Experiencing A Boom

    Much like selling when your business is performing well, another good time to sell your business is when your location is growing or your industry is hot. If your geographical area is experiencing tremendous growth, then it shows that the area is prospering. More people to the area signifies a healthy local economy, which is of course good news for local businesses.  This should mean more customers, more sales, and a higher bottom line in owner benefit. This should be the perfect recipe to attract a quality buyer at top dollar. If your particular industry is experiencing a boom, then now is the perfect time to think about selling. As with any wave, you can only ride it for so long, before it breaks and crashes. Ideally, you would want to be able to sell your business before that happens. The last thing you want is to be selling the equivalent of video rental retail store in the age of Netflix and digital rentals. A booming industry also attracts more buyers, so your chances of actually selling your business are much higher.

    5) Your Business Is Sufferingup and getting out, before it’s too late. The truth is that you do still have a chance of selling, even if your business is not doing well or if you are losing money, especially if you have equipment that is valuable. Furthermore, there are some buyers out there who actively look for struggling businesses to purchase and rejuvenate. It seems obvious to say here, but if your business is suffering, do your very best not to “check out” and make sure you fully concentrate on keeping your business afloat for as long as you can. The average business in Florida takes about 280 days to sell, so give your Business Broker a fighting chance to sell it for you. Don’t wait until the last minute to list it, because if you only have a few months left before you are forced to close the doors, chances are you might not be able to sell in time. If your gut or your bank account balance is telling you that it’s time to abandon ship, get your business on the market as soon as you possibly can. A qualified Business Broker can assess your situation and give you their honest opinion. 

    If you've spent years, maybe even a lifetime, building a small business and are starting to think about retiring, cashing out, or changing paths, now may be a good time to sell up. Only you can decide whether or not now is the right time for you to sell. If you’d like to speak with us about your options, we’d be happy to chat with you. The most important thing is to engage with us early on, so that we can partner with you to create the ideal exit strategy...

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    Business Broker FAQs

    Wednesday, May 22, 2019, 4:18 PM [General]
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    We love talking to potential buyers and sellers about what we do and how we do it differently than every other Business Brokerage out there. We've compiled a list of the most frequently asked questions that we get from customers. Hopefully this question and answer session will give you some insight into the things that you might be wondering about as well. 

    How To Value A Business For Sale?

    Business valuations can be a tricky task, and everyone seems to have varying ideas of how to value a business. We've talked to sellers who have been told by their CPA that a business is always worth 3 times its annual sales revenue, or they've been told by a fellow owner in their same industry that they should be getting a certain dollar amount because their industry is "hot right now." The truth is that a business valuation really comes down to how well the individual business is performing. We offer free, confidential valuations to all sellers who are considering listing their business for sale with us, because if you don't know what it's worth, how can you make a rational decision about selling?

    In the world of selling small businesses, we value businesses generally in one of two ways. The most common way to value a business is via a multiple of the Owner Benefit or Seller's Discretionary Earnings (SDE). We will look at your last 3 years of tax returns or Profit & Loss Statements to calculate your true Owner Benefit or SDE. From there, we research sold comparable businesses to get a realistic industry multiple. Using that multiple we will calculate the price that will give a business owner the most accurate estimate of value for their business. The second most common way to value a business is using the asset value. In this case, the value of the business is based on the fair market value of the tangible assets (equipment, inventory, etc) that the business owns. 

    If you're selling your business, ultimately, it's only worth what a buyer will pay for it. So, getting the pricing of your listing right is the key to finding a buyer. 

    If you'd like to get a FREE valuation of your business, please click HERE

    How To Price My Business For Sale?

    Once we have an understanding of value, then we can strategically look at pricing your business for sale. We want to help you get the most for your business, but we also want to make sure that we advise all of our sellers as to what the most probable selling price would be, in order to set your listing up for success. At Green & Co. Business Brokers, we don't want to just list businesses for sale, we want to actually sell them for the business owners who have put their faith and trust into us. In order for us to get a successful sale, the listing price needs to be right from the start. There is also typically less negotiation room in a business sale, if the business is priced correctly, so there is no need to pad a listing price with lots of "wiggle room." 

    Pricing will also depend on how motivated you are to sell. The average business for sale is on the market for 282 days, so if you want to sell your business faster, it needs to be priced much more competitively that all of the other similar listings out there.

    We will help to suggest pricing that reflects market value, as well as your goals and desires, and we will always do our very best to get you the best deal possible. 

    How To Sell Your Business In Florida?

    We get a lot of questions about how the sales process works here in Florida. Here is a general overview of the main elements:

    1) Business Owner wants to sell

    2) Business is Valued

    3) Business is listed for sale by a Business Broker and marketed confidentially through multiple methods, to potential buyers

    4) Buyer Signs Non-Disclosure Agreement (NDA)

    5) Buyer Reviews Confidential Business Review (CBR)

    6) Buyer/Seller Meeting

    7) Offer & Negotiation 

    8) Under Contract

    9) Due Diligence 

    10) Lease/Commercial Real Estate Purchase

    11) Loan Commitment

    12) Closing

    If you want to learn more about selling your Florida business, we wrote an entire eBook on the topic. To download our FREE eBook, "Selling Your Florida Business: The How-To Guide" CLICK HERE

    When you are buying or selling with Green & Co. Business Brokers, we help you through each of the elements of the sales process. We are experts at selling businesses and we are very familiar with the process. Let our knowledge and expertise work for you. 

    How To Sell Your Business To A Competitor?

    Sometimes competitors are the most qualified buyers that you’re ever going to find. Competitors are already business owners, which means they have verifiable finances and a vast reputation in the business community. Also, by selling to a competitor, you are selling to someone who can run your business properly, because they already have a similar undertaking of their own in the same industry that they are running too. So, they know the ins and outs of the market and how to bring in more customers. That way, you can be sure that you’re leaving your business with a buyer who isn’t going to run it into the ground as soon as you leave.

    For the right businesses and industries, we will target competitors as potential buyers for businesses that we have for sale. Of course, this is done with the full buy-in and permission of the seller. If a seller would like us to confidentially search for a strategic buyer or competitor who’s possibly interested in growing their business via acquisition, then we have strategies and methods for testing the interest of competitors, without letting them know any details of the business that is actually for sale. 

    How To Purchase A Business?

    At Green & Co. Business Brokers, we LOVE working with buyers. The majority of Brokers in our industry shy away from working with buyers, and they prefer to work with sellers. We've solved that issue by having Brokers on our team dedicated to working only with buyers or only with sellers. That way, our buyers get the attention and care that they deserve. Did you know that working with a Broker to help you purchase a business is 100% free for a buyer? That's right...the seller pays the commission in a business sale transaction, and the Listing Broker splits the commission 50/50 with the buyer's Broker. Why not have a Broker in YOUR corner to get you the best deal possible? 

    If you are looking to purchase a business, first, find a great Broker to work with (it's don't pay anything for their services). Then find a great business that peaks your interest. You will need to fill out a Non-Disclosure Agreement (NDA) for EACH business that you inquire about. Once that's done, you will receive a Confidential Business Review (CBR) or buyer's package with detailed information about the business that's for sale. From there, you might have questions that you'd like to ask the seller. That is the perfect time to have your Broker schedule a buyer/seller meeting. At the buyer/seller meeting, you should get your questions answered, and decide whether or not you want to move forward in making an offer on the business. Your Broker will work with you to write up the offer and submit it to the seller. The negotiation process then commences. If a meeting of minds is reached between buyer and seller, then you will go "under contract." Once that happens, Due Diligence starts. Due Diligence is your chance to ask in-depth questions, and request financial documentation to prove the numbers you were given on the CBR or buyer's package. If everything looks good, you will then move past Due Diligence and onto the other elements of the closing process. Your Broker will help to guide you through each of these elements. Hopefully you will arrive at the closing table, and own your new business. You will be off on an exciting new adventure as an entrepreneur!

    We also wrote an eBook for potential buyers, which is called "Buying A Florida Business: The How-To Guide" and you can download it for free HERE!

    How To Choose A Business Broker?

    The best way to choose your Business Broker is to check out Brokers in the area. Don't limit yourself to just your immediate city, as Business Brokers often work a large geographical area of multiple counties. Look at their online presence. How does their website look? Are they in touch with what's happening with today's marketing technology? Do they have customer reviews posted? Are they advertising their business listings well? Then, we would always suggest to interview more than one Broker, to see which one is right for you. All Brokers are definitely not created equal, so ask them how they are different and what makes them the Broker that you should choose to work with. 

    If you are a buyer or seller, looking for a good Business Broker, we would appreciate the opportunity to earn your business. 

    How To Become A Business Broker?

    All business Brokers in Florida are required to hold a valid Florida Real Estate License. The reason for that is because we do sell commercial real estate, if it is owned by a business that we are selling. You also need to have a background working with small businesses, and working with business financials, such as Profit and Loss Statements and Tax Returns. You have to enjoy working with people, and you also have to be good at thinking outside the box when problem solving. Experience working in sales is also a great asset for the contracts and negotiation parts of the sales process. 

    Interested in learning more about becoming a Business Broker with Green & Co.? Click HERE to learn more. 

    Do you have more questions or a specific question about your business or situation? Give us a call or send us an email, and we'd be more than happy to chat with you. 

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