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Understanding Lease Assignment

Understanding Assignment of Lease

Understanding Assignment of Lease



One of the most overlooked issues when selling or buying a business is the Lease Assignment. Since most businesses rent their real estate the Landlords consent is necessary before a change of ownership can proceed.

It is best to be well prepared for this process. Lease assignments can take anywhere from days to months. The bigger the Landlord typically the longer and more arduous the process. Be prepared to pay an assignment fee. This can run into the thousands of dollars and may or may not be negotiable.

The Landlord will typically require some or all of the following documentation
•Asset Purchase Agreement (buy sell agreement)
•Lease Application
•Buyers Resume
•Buyers detailed Financial Statement
•Buyers credit report or permission to obtain credit report
•Buyers Tax Returns (typically a three year history)
•Buyers proof of assets (Bank Statements, Brokerage Statements etc.)
•Detailed business plan covering first 2-3 years of operation
•Articles of Incorporation if the ownership will be held by a Corporation or LLC

It is best to begin collecting these documents immediately. Submitting a complete package to the Landlord not only avoids unnecessary delays but also provides a clear impression that you are organized and efficient. The old adage about “you only get one chance to make a first impression” is so true here.

During the bad years following the financial meltdown of 2008, it was not uncommon for Landlords to grant concessions to new tenants. However in recent years as the economy has improved this has become less common. Still if you do your research and determine that a rent reduction is justified it may not hurt to request one. If a Landlord is willing to be flexible they often prefer to offer a period of free rent rather than a rate reduction.

Another important concern for the assignee is the length of time remaining on the lease. If the location is important and you plan on remaining there you may want to insist on a longer lease or end of lease “options”. These options will give you the right to extend the lease after it expires.

Once the Landlord has reviewed your documentation they will typically request a sit down meeting. This is an opportunity for the Landlord to assess you in person. Treat it as a serious matter. Show up on time and in business dress.

The last step will be for the Landlord to approve the assignee and draft the new lease documents. You may choose to have your attorney review these to determine if they are acceptable. Finally do not forget costs associated with becoming a tenant. In addition to the lease assignment fee you may be required to pay lease deposits as well as first and last month rent. Other ancillary startup costs such as utility deposits, vendor deposits and fees could be required.

The best person to guide you through this entire process is a Professional Certified Business Broker. In Florida the best Business Brokers belong to the Business Brokers of Florida (BBF). Ask if you Broker is board certified.

Anthony John Rigney PA BCI (Board Certified Intermediary) is a Business Broker living and working in Jacksonville, Florida

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Should you make a lowball offer?

Lowball

Should you make a lowball offer on a business?



When buying a business is it a good idea to make a lowball offer? This is a critical question for many buyers. How should you frame your initial approach – a fair offer or start out low?

People will make a low offer for a number of reasons.

They don’t know what to pay –
Many times buyers are confused as to what they should pay for a business. Because they don’t know what to pay they play it safe by making a low offer.

They think this is how you do things –
Some buyers believe that starting out with a low is how business is done. They believe that they will meet the seller somewhere in the middle.

They receive bad advise –
Not knowing what to pay for a business, buyers often seek advice from those they think are knowledgeable. Sometimes this advice can be way off the mark.

It’s all they can afford –
This happens when buyers look at a listing which is more than they can truly afford. They hope to negotiate the price down to their price range.

They are looking to “steal” a business –
These buyers hope to acquire a business for a good deal less than its value.

A lowball offer will likely not be successful. Business owners view their business as a reflection of themselves. They have invested time and money, blood, sweat and tears to build it up. A low offer will often be perceived as an insult. In fact in the wake of a low offer I have had sellers tell me “I wouldn’t sell my business to that person at any price”.

Just recently I had a buyer interested in a niche type of business. It was the perfect fit for him and the type of business that does not come along very often. Against my advice his initial offer was 60% of the reasonable asking price. The seller was so offended that it did not matter when the buyer later raised his price. We were unable to reach agreement. The initial offer so offended the seller that he was in no mood to bargain.

If you find a business you want to buy the best approach is to do your research and calculate a fair offer. Many times the business is already priced fairly to begin with. A good deal of businesses will sell at list price. If you feel the price is fair then do not be afraid to pay it. Once you have determined the price you want to offer it’s OK to offer a little less to leave yourself some bargaining room.

Those who offer low thinking it will make the buyer come down more in price are usually in for a nasty surprise. In response to a low offer many sellers dig in their heels and refuse to budge. On the other hand if they perceive the offer as reasonable they will often respond in kind and try to find a happy middle ground. At the end of the day for a deal to work it has to be perceived as a win/win by all parties.

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Buy a Business In 2015

New Year
Buy a business

Let me help you make your dreams come true in 2015. As one of Florida’s top Business Brokers I can help you find the right business. There are five things you should know about my services.

One Broker
As a member of the Business Brokers of Florida I cooperated with over 1,000 active business brokers in this State. That means that when you work with me – you will have access to all their listings.

One Website
From my website you can search almost 4,000 business listings throughout the State of Florida. Click on this link to start now and remember to bookmark it

Experience
I have been a successful business broker for over eight years. I hold the prestigious designation of Board Certified Intermediary (BCI). Prior to becoming a business broker I ran a successful small business for many years. There is no one better equipped to assist you in your search.

Technology
I utilize the latest technology to allow you to start your search from the comfort of your home. Digital signing of Non Disclosure Agreements and other documents along with Web Meetings and Video Conferencing will cut out much of the time consuming leg work.

Network
I cooperate with a Network of professionals eager to help you in your search. Whatever advice you need I can recommend the right professional to assist you. Learn more View my collection of informational videos or read my blog. I look forward to helping you.

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Buying the perfect business

Perfection
Buying the perfect business.

How do you find the perfect business to buy? Well that’s a trick question. Because there are no perfect businesses. Like the people who create them businesses are imperfect. There are buyers who have spent many years looking for the perfect business. They become confused and disappointed when they don’t find it. One buyer recently told me “Every listing I have looked at has its negatives”. The fact is that if there is ever a perfect one out there, it will get snapped up before you have an opportunity to look at it. So save yourself the time and agony and try instead to find the business that is right for you.

When evaluating an opportunity use the time honored method of drawing a line down a sheet of paper. Itemize the pros on one side and the cons on the other. When your pros outweigh your cons you might have found the business you should buy.

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Buy a Business or Launch a Startup?

Open Sign

Open for Business


Is it better to buy an existing business or launch a startup? The answer may depend on your goals. However In general it is better to buy a business than to start one from scratch. The reasons are varied. First of all buyers often underestimate the true cost of establishing a business. Let’s take a simple retail business for example. Before opening the doors a buyer must

  • Find a location

  • Negotiate a lease

  • Pay for the buildout

  • Purchase furniture, fixtures and equipment

  • Purchase inventory, marketing and advertising material

  • Interview and hire employees

  • Establish vendor relationships

  • Obtain licenses and permits

  • Invest a considerable amount of their time and labor
  • (never free)

    Once open, the new business has to build a loyal customer base. Most startups don’t show a profit until year two or three. During this time the owner is supporting the business instead of the other way around. The total expense of getting to the point of success will typically be more than a buyer would have paid for a successful established business.

    Another reason to buy instead of startup is the high failure rates of new enterprises. Statistics show that by year four 50% of startups are no longer operating. Established businesses with a track record have a much lower failure rate.

    Buying a business gives you a functioning and profitable business from day one. You avoid the headaches of a startup but still have the ability to mould the business to your own personality. You are less likely to see your business fail and your investment lost.

    There are of course reasons to start up a business. If you have a unique idea and the funds to see it through you may need to build it from scratch. But in general it is better to take over after someone else has done the heavy lifting.

    Anthony John Rigney PA is a successful Business Broker. He works with business owners and buyers to accomplish a smooth transition of ownership. For more information call today 904-725-7677

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    Buying or selling a business is a complex process. Make sure you have the right team on your side. Contact us today!