By: Jayson Schwarz LLM
Ok, so you have decided to purchase a commercial building, a restaurant, a dry cleaner, a franchise, a business and you have never owned a business before . . . how and what do I do?
Firstly, make sure you are not undercapitalized. In my almost thirty years of law practice I have seen more businesses fail because they were leveraged to the hilt and did not have enough equity then for any other reason. All it took was one bad period and they could not survive because they did not have the cash resources to do so.
Secondly, make sure you know something about the business you want to go into or the real estate you want to purchase. In other words have some experience. If you do not have any get some!! How? Go work for someone in the industry or a few someones until you get a good idea of what works and what doesn’t. Ask questions, keep notes and read. Yes read! Go to the library, Government publications, the internet and learn about the industry and the business. Research the area if it is real estate based and what is planned for the future. There will be many articles and people to speak to if you look hard enough.
Thirdly, if you do not understand accounting take some simple accounting courses . . . Why? Good question. If you cannot read financial statements how can you figure out if the business you want to buy is what you think it is. One of the most important things as a business owner that you need is knowledge of every aspect of your business and finance is one of them most critical. We hire bookkeepers but who says they are accurate, honest, careful or dependable. You need to know what is going on before you buy and after you buy to keep your business properly on course.
Fourthly, professionals. Find a good lawyer and a good accountant as this one-two punch is one of the foundation blocks of your business. You lawyer will help you with correct structure within which to operate your business; drafting the Agreement of Purchase and Sale and the purchase your business, your lease, etc. Your accountant will ensure your books are set up properly, help draft the business plan, advise you and discuss financial and tax issues, etc.
recommend you find an experienced commercial real estate agent to present the offers amendments etc. after they have been drafted by your lawyer because this professional makes a living ensuring deals close and he will understand all the nuances of the negotiation.
Once these hurdles are overcome identify a target business and study it. Watch the comings and goings. How many people a day go in and out etc. Once you are satisfied get all of the data you need to prepare your offer.
The Offer or Agreement of Purchase and Sale is probably the most important document in the purchase process. Think of it as the blueprint for the deal. It requires a great deal of forethought and planning in order that you get what you think you bought. Your lawyer is the proper person to draft this Offer in order to ensure you are protected.