First Time Business Owners
This year has been quite a challenging one for me as we have seen a large number of baby boomers putting their businesses on the market to sell and there has also been an increase in first time business owners trying to purchase their first business venture.
The reason it has been challenging is because many of first time business owners have not done their homework on what is required to gain acceptance from the Landlord. The Landlord is the final hurdle that stands in the way of a business sale transaction. Should the landlord not accept the new tenants on the lease the sale falls over and all the hard work that has been done up to that stage was for nothing. In my opinion there are some fundamental steps a first time business owner should take beginning their search for a business.
Make sure you have spoken to someone at the bank or engaged a mortgage broker before starting to look for a suitable business. I have had so many experiences with customers falling in love with a business, only to find out 3 to 4 weeks down the track that they can not afford it.
Not only have they wasted their time, but also the business owners time and even in some cases they have disturbed the day to day running of the business.
In many cases I have sold businesses to first time business owners that have never had any experience in the business that they have bought. Quite often in a short period of time they have had to sell it again for a cheaper price that they bought it.
In my opinion first time business owners need to have an understanding of what you are getting yourself in to. If you have worked in the industry before it definitely helps, if not a business coach can come in very handy.
Make sure you search the web for as many similar businesses as possible so you can make a better judgement of what you are buying.
Ask your broker what else he or she might have available that suits your needs.
Once the right business has been found and an agreement between vendor and purchaser has been made, the paperwork starts.
Also don’t get disheartened if at first you don’t get accepted by the landlord. You can always negotiate a deal. Offer them 2 months worth of bond instead of one.You can also offer the landlord a guarantor to go on the lease if you are not asset rich. This might be a family member. Most importantly in my opinion get advise from you solicitor.
Previously Landlords were receiving applications from purchasers that have had numerous businesses in the past, are asset rich and have a long trail of business experience behind them.
The market is changing and the number of purchasers that have owned numerous businesses in their past are decreasing as most of them are retiring.
Thats where first time business owners come into the picture.
In my experience the Landlord has made the sales process for the purchaser and vendor very difficult in many cases and in some cases ended the deal.
Often this is because many purchasers are not prepared or don’t get the right documentation ready in time. Right from the start they are on the back foot with the Landlord. Sometimes they get rejected straight away or the landlord asks for ridiculous amounts of money for bond. Just recently I’ve had a landlord ask for a bank guarantee of $50,000 from the purchasers to secure the lease.
Recently something I have started doing once an agreement has been reached between vendor and purchaser is trying to prepare my purchaser for the Landlord.
In many cases first time business owners need to get ready for a rough week or two.
I have always given my opinion on what has worked in the past for first time business owners. Of course every sale is different but, the process doesn’t change.
Make sure when presenting your documentation to the landlord which will be through your solicitor you give everything at once, not a few documents here and a few more a week later.
It makes you look unprofessional. Something that has worked for numerous purchasers of mine in the past is that they have prepared a business plan. Most landlords will not ask you for one. but they will be very impressed if they get a business plan as it illustrates to them how serious you are about succeeding in your business.
The main documents that all landlords ask for is an Asset and Liability Schedule and about 3 business references.
When acquiring your references make sure they are business related and not personal friends that have written about you.