The Often-Overlooked Importance of Leases
When buying or selling a business, it is critically important that you evaluate the lease. It is a strange phenomenon that otherwise savvy business people will treat leases as a secondary concern. However, problematic terms in a lease can literally force you to pack up a business and move. This would not only be a jarring experience, but a very costly one as well.
Finding a good location is of paramount importance to both the profile and profitability of your business. You may feel that there are more important issues when buying or selling a business. But by the end of this article, you’ll see the wisdom in placing a lease near the top of your “to evaluate” list.
There are three different kinds and types of leases: a new lease, an assignment lease and the sublease. All three of these options are most definitely different from one another and can potentially impact your business in different ways.
The New Lease
A new lease, as the name indicates, is the result of a lease that has expired. That means that the buyer must work with the landlord to establish a new lease. Buying a business only to discover that you don’t have a lease and the landlord isn’t interested in keeping your business at its current location is most definitely a shock that no business owners want to encounter. Buyers should be one-hundred percent certain that they have a lease in place before they buy a business.
Assignment of Lease
The second type of lease is the assignment of lease; this form of lease is quite common. It involves the buyer of a business being granted the use of the location where the business is currently located and operating. Through the assignment of the lease, the seller is able to assign the buyer the rights associated with the lease. Of course, it is important to keep in mind that the seller is not acting as the landlord, but instead, simply has the ability to assign the lease.
The Sublease
The third option for lease is the sublease. The sublease is basically a lease within a lease, and it comes with some important distinctions that must be understood. A sublease generally requires the permission of the landlord and that permission should not be viewed as a “foregone conclusion” or “automatic.”
The bottom line is that no new business owner wants to discover that their new business doesn’t have a home. There are an array of very important issues to work out when buying a business, and it is critically important that buyers never overlook what kind of lease is involved. A savvy seller will highlight what kind of lease they have, especially if the terms are favorable. But buyers should always be proactive and ask questions about the status of the lease and make certain that lease terms are clearly defined.
Copyright: Business Brokerage Press, Inc.
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Buying/Selling a Business: The External View
There is the oft-told story about Ray Kroc, the founder of McDonalds. Before he approached the McDonald brothers at their California hamburger restaurant, he spent quite a few days sitting in his car watching the business. Only when he was convinced that the business and the concept worked, did he make an offer that the brothers could not refuse. The rest, as they say, is history.
The point, however, for both buyer and seller, is that it is important for both to sit across the proverbial street and watch the business. Buyers will get a lot of important information. For example, the buyer will learn about the customer base. How many customers does the business serve? How often? When are customers served? What is the make-up of the customer base? What are the busy days and times?
The owner, as well, can sometimes gain new insights on his or her business by taking a look at the business from the perspective of a potential seller, by taking an “across the street look.”
Both owners and potential buyers can learn about the customer service, etc., by having a family member or close friend patronize the business.
Interestingly, these methods are now being used by business owners, franchisors and others. When used by these people, they are called mystery shoppers. They are increasingly being used by franchisors to check their franchisees on customer service and other operations of the business. Potential sellers might also want to have this service performed prior to putting their business up for sale.
Copyright: Business Brokerage Press, Inc.
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Best Business Broker in Toronto, Ontario Canada
Selling and buying a business broker in Toronto is a risk worth taking! In fact, for many entrepreneurs or business owners, selling a business for a significant price represents the culmination of years of hard work and perseverance. However, finding buyers for your company might be intimidating if you are not in the HOT sector or don’t have any unsolicited bids.
Consider hiring a business broker in Toronto, similar to a commercial real estate broker, to obtain access to a broader pool of purchasers and an organized selling process. Simply put, the business brokers in Toronto & Mississauga act as matchmakers by bringing together buyers and sellers.
The right broker will assist you in sealing a great deal, maximizing the sale price for your business, and funding the retirement of your dreams.
So, if you have decided to put your business on sale and are on the lookout for an experienced business broker in Canada, here are a few tips for you. Put the sale of your business in the right hands by following these tips:
Get referrals
If you are thinking of “how to find the best business brokers near me,” start with local references. Trust us; they are one of the most common methods to locate a business broker. Check out who’s listing businesses in your region, and then discreetly use your industry contacts to check their qualifications.
The trick is to gather the necessary information while keeping a low profile before the sale. Always start with a reference from a reliable source if at all feasible. For names of reputed estate and business brokers, ask your accountant, lawyer, colleagues, and industry organization.
Track record
Be careful if a potential broker can’t give the contact information of satisfied clients, or qualified buyers, or show client testimonials. Following up with past clients is imperative, so cross-check once the broker gives you a list of his/her clients or brokerage services. Ensure that the business broker in Mississauga is indeed the superstar he/she claims to be.
Inquire about the broker’s personality and characteristics. Inquire about his/her strengths and limitations, and evaluate how those characteristics align with your objectives. Check if they hold a real business broker license in Ontario. Only after a complete fact-check, get started!
Specialized experience
Look for a business broker in Toronto who specializes in the sale of similar businesses to yours. Even the most competent brokers may struggle to sell your company due to a lack of knowledge in your sector.
The top business brokers in Canada will have experience selling firms in your geographic region and within your pricing range. If the Toronto business brokers do not have this information, their marketing and pricing efforts may fall short of your sales goals.
Established relationships
The best Ontario business brokers and M&A have ties with local lawyers, accountants, and other experts, and they aren’t hesitant to rely on them when they need help. If they claim to be taking care of all the tasks by themselves, a disaster will take place.
Even if you choose to hire your lawyer or accountant, it’s comforting to know that your broker is well-regarded by other experts in your community.
Transparency
The most common roadblock to effectively selling a business is pricing. However, many brokers do not tell their customers the truth about the value of their company for a variety of reasons. Instead, they keep on misguiding their clients, which can cause the selling process to stretch on for months. They must have a code of ethics.
Superstar business brokers in Toronto and Mississauga are forthright about business valuations, prices, and other sensitive problems like trust accounts, even if the outcomes are undesirable. So, start making a Toronto business brokers’ list, and you will get an idea.
IBBA
The International Business Brokers Organisation (IBBA) is a trade association committed to fostering professional standards among its members. The website features a tool to assist sellers in locating IBBA brokers in their region. Look for brokers that have earned the certification of CBI or Certified Business Intermediary in addition to being IBBA certified.
Certified real estate and business brokers can help you buy or sell a business quickly and successfully by bringing additional training and knowledge to your transaction while abiding by the rules of the Business Brokers Act.
Hope these tips help you find the right broker for your business! Good brokers assist companies in locating prospective buyers and navigating various intricacies of sales. So, whether you wish to buy or sell a business, a business brokerage firm can help!
Work with your team of professional advisors and start making a business brokers list in Toronto. The licensed business brokers in Ontario Commercial Group are experienced and skilled enough to guide you well throughout the buying and selling process. Additionally, they are both IBBA and CBI certified.
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What Makes Your Company Unique in the Marketplace?
There are unique attributes of a company that make it more attractive to a possible acquirer and/or more valuable. Certainly, the numbers are important, but potential buyers will also look beyond them. Factors that make your company special or unique can often not only make the difference in a possible sale or merger, but also can dramatically increase value. Review the following to see if any of them apply to your company and if they are transferable to new ownership.
Brand name or identity
Do any of your products have a well recognizable name? It doesn’t have to be Kleenex or Coke, but a name that might be well known in a specific geographic region, or a name that is identified with a specific product. A product with a unique appearance, taste, or image is also a big plus. For example, Cape Cod Potato Chips have a unique regional identity, and also a distinctive taste. Both factors are big pluses when it comes time to sell.
Dominant market position
A company doesn’t have to be a Fortune 500 firm to have a dominant position in the market place. Being the major player in a niche market is a dominant position. Possible purchasers and acquirers, such as buy-out groups, look to the major players in a particular industry regardless of how small it is.
Customer lists
Newsletters and other publications have, over the years, built mailing lists and subscriber lists that create a unique loyalty base. Just as many personal services have created this base, a number of other factors have contributed to the building of it. The resulting loyalty may allow the company to charge a higher price for its product or service.
Intangible assets
A long and favorable lease (assuming it can be transferred to a new owner) can be a big plus for a retail business. A recognizable franchise name can also be a big plus. Other examples of intangible assets that can create value are: customer lists, proprietary software, an effective advertising program, etc.
Price Advantage
The ability to charge less for similar products is a unique factor. For example, Wal-Mart has built an empire on the ability to provide products at a very low price. Some companies do this by building alliances with designers or manufacturers. In some cases, these alliances develop into partnerships so that a lower price can be offered. Most companies are not in Wal-Mart’s category, but the same relationships can be built to create low costs and subsequent price advantages.
Difficulty of replication
A company that produces a product or service that cannot be easily replicated has an advantage over other firms. We all know that CPA and law firms have unique licensing attributes that prevent just anyone off of the street from creating competition. Some firms have government licensing or agreements that are granted on a very limited basis. Others provide tie-ins that limit others from competing. For example, a coffee company that provides free coffee makers with the use of their coffee.
Proprietary technology
Technology, trade secrets, specialized applications, confidentiality agreements protecting proprietary information – all of these can add value to a company. These factors may not be copyrighted or patented, but if a chain of confidentiality is built – then these items can be unique to the company.
There are certainly other unique factors that give a company a special appeal to a prospective purchaser and, at the same time, increase value. Many business owners have to go beyond the numbers and take an objective look at the factors that make their company unique.
Copyright: Business Brokerage Press, Inc.
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The Advantage of Buying an Existing Business
Most people think of starting a business from scratch, developing an idea, building a company from the ground up. Starting from scratch, however, has its disadvantages including – developing a customer base, marketing the business, hiring employees and creating cash flow … without any history or reputation to rely on.
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To avoid these challenges, buying an existing business may prove to be the better solution. Buying an existing business has its advantages – including, but not limited to:
The Business Is Established.
An existing business is a known entity. It has an established and historical track record. It has a customer or client base, established vendors, and suppliers. It has a physical location with furniture, fixtures, and equipment in place. The term “turnkey operation” may be overused, but an existing business is just that, and more. New franchises may offer a so-called turnkey business opportunity, but it ends there. Start-ups are starting from scratch with all the disadvantages stated above.
The Business Has Existing Relationships.
In addition to the existing relationships with customers or clients, vendors, and suppliers, most businesses also have experienced employees who are valuable assets to the company. A buyer may already have established relationships with banks, insurance companies, printers, advertisers, professional advisors, etc., but if not – the existing business/owner does, and they can readily be transferred to the buyer as part of the acquisition.
The Business Isn’t “A Pig in a Poke”.
Starting a new business is just that: “a pig in a poke.” No matter how much research, time, and money you invest, there’s still a big risk in starting a business from scratch. An existing business has a financial track record along with established policies and procedures. A prospective buyer can see the financial history of a business – when sales are high and low, what the true expenses of the business are, and how much money an owner can make, and more. Also, in almost all cases, a seller is more than willing to stay on to teach and work with a new owner – sometimes free of charge.
An Existing Business Comes with A Price and Terms.
As stated above, an existing business has everything in place. The business is in operation and typically has an established selling price. Opening a new business from scratch comes with a great degree of uncertainty and can become a proverbial “money pit”. When purchasing an established business, a buyer knows exactly what he or she is getting for their money. In many cases, a seller is also willing to take a reasonable down payment and then finance the balance of the purchase price.
The “Unwritten” Guarantee.
By financing the purchase price, a seller is saying that he or she is confident that the business will be able to pay its bills, support the new owner, plus make any required payments to the seller.
Copyright: Business Brokerage Press, Inc.
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