What is the extent of the Buyers obligation to investigate a business before purchasing it? To what extent should a Buyer rely on the Selling Broker for "decision making" information? A "Common Sense" approach to buying a business should tell you that certain areas need to be investigated before completing any business acquisition. So why is it that so many people find out so much about the business they purchased after the closing of the escrow?
The Buyers diligence begins upon the early stages of developing the idea to begin a business. The Buyer needs to start by thinking out how deep his or her commitment to the business will be. Is the Business Model conducive to your life style? It is extremely important to be realistic, fully aware and prepared for the commitment of a new business. Regardless, if the business is easy to operate, like a Coin Laundry or more complex and time consuming, like a restaurant. An acquisition of a business requires independent thinking and a willingness to seek expert help and guidance, when lacking. While Business Ownership offers a sense of freedom like nothing else can, without proper preparation this dream can turn into a nightmare; and always, unnecessarily.
As for the purchasing of the business; does the Buyer possess the skills necessary to assess and evaluate the business? Doe he or she have a good understanding of the potential of the market place, knowledge of the age, efficiency, current nature of, and condition of equipment and fixtures, marketability of the inventory and, of course the lease terms are critical to understand.. These are big questions and require investigation; along with the more obvious, books, taxes and receipts. Does the Buyer have a clear picture of the improvements that need to be made to advance the business? No one wants to buy a business that can't be improved. Typically, a new owner will want to make improvements. So, an understanding of the improvements that need to be made, along with a realistic estimate of their costs and the anticipated Net Effect; in terms of the Return on Investment, for these improvements need to be understood long before the lifting of contingencies or earlier.
It has been my experience that most Buyers anticipate that the Sellers Broker is on their team. This might very well be true; but you should start with a clear understanding of the role of the Broker. The extent of the relationship between Buyer and Broker needs to be clarified up front. In many cases, where the Buyer is fully capable of assessing the business and these other areas, the Sellers Broker alone might be sufficient. But in many transactions the Sellers Agent, is just that. Your questions might be answered but not unless you formulate them for yourself, first.
The key is to make certain you are getting what you are paying for. The Buyer is entitled to Fair Dealing practices from the Sellers Broker, but often times needed areas are neglected. It is important to have qualified representation looking after your interests. In selecting a Broker, be certain that the Broker you choose to work with has specific knowledge of the business and industry you are purchasing and your personal goals. Be certain that what you paid for is what you get.
With so much at stake; why is it, that in so many transactions the Sellers agent is the only agent? It might be due to the Selling Brokers reluctance to share their commissions. This is compounded by the Buyers reluctance to pay out additional funds for a Broker or specialist/consultant. The additional fee might seem unnecessary. To just complete a transaction, so, many Buyers rely on the Sellers Agent for assistance. This can create a misunderstanding; unless properly clarified at the beginning of the relationship.
I have personally acted as a Dual Agent in the majority of my own transactions. I believe that honest and experienced Brokers can deal in this role effectively; but, it must be understood early on. The Seller should also be aware of the Buyer/Broker relationship and understand its implications. It is additionally important that the Broker clarify the limits of the relationship and his obligation to the Buyer at the onset of the negotiations.
But once you have taken possession you are left on your own to discover the issues that were not brought into the conversation during the transaction. So start out right. You need and deserve individual attention. Be sure you get it!
About The Author: Chuck Post specializes in assisting those selling or buyinig coin laundries throughout Southern California. He also offers other specialized services: Expert Witness Services & Coin Laundry Valuations. Make sure you check out his popular monthly workshops on the topic of buying and selling coin laundries. You can reach Chuck direct at 619-227-5711.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Steve Erlinger: Laundry Broker, Consultant - Orange/Riverside Counties
I specialize in the laundry industry (Broker/Consultant at 949-500-5893) - Riverside, Orange Counties. I assist buyers navigate the many facets of finding, evaluating, and operating a laundry business. I also help current laundry owners find additional stores, sell, evaluate an existing laundromat.
|Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance
For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.
|Brad Steinberg, Broker - Laundromat Specialists
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
|Larry Larsen, Broker, Laundry Specialist - Orange, LA Counties
Larry Larsen, Realtor has over thirty years of experience in the sales, ownership, management, and construction of coin laundries. He is a licensed broker active in the sale of coin laundries, a licensed insurance agent specializing in coin laundry insurance. Phone Larry at 714-630-9274.
|Mike Hurrell, Broker: Coin & Card Laundry Specialist Brokerage
Providencia Properties Inc in association with Golden State Laundry Systems is a full service Coin Laundry Real Estate Broker. At GSLS you will receive personalized attention from our professional staff of coin laundry experts. To sell or buy a Southern CA laundromat call Mike at 310-223-2240 X209.
|Chuck Post: Laundry Buyer Representation, Consulting, Due Diligence
Chuck Post has 32 years experience in the laundry industry, specializing in assisting laundry buyers (and entrepreneurs) with buying or starting up, building, re-tooling, laundries throughout California. Laundry buyer representation, consulting, due-diligence, lease negotiations, laundry valuations.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
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|FREE Live Laundry Seminars For Buyers: See Our Upcoming Schedule Of Seminars
Looking to buy or start up a card or coin laundromat? PWS Laundry is presenting their schedule of upcoming Seminars for laundry buyers & entrepreneurs. These informative live Seminars will cover an overview of the laundry industry, selecting the right location, an overview of leases, Q&A, plus more.
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Chuck Post (reach him at 619-227-5711) a laundry consultant, specialty broker, buyer representative & due diligence advisor starts this discussion on why it's important to have an exit strategy in mind while buying a laundromat! He & others explain why this concept is so important to serious buyers.
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