How To Buy A Business In Florida
How to Buy a Business in Florida
By Michael Shea P.A.
Certified M&A Professional
Board Certified Intermediary
Introduction:
When I first gave thought to writing this eBook, I had to ask myself some hard questions. What qualified me to pen a resource for business buyers here in Florida? I’m not a classically trained finance professional. I’m neither an account nor do I have an MBA. I’m not a super smart “Gordon Gekko” type that graduated from Harvard with a fancy pedigree. As a buyer, you should be discriminating enough to ask yourself the same questions, so allow me to offer some personal background information to encourage you to read further.
My education is somewhat nontraditional for a finance professional: I have a degree in history with a minor in military science from Providence College. I had set my mind on a professional military career but history and luck changed my trajectory. When I transitioned to the civilian world I completed a year of graduate school pursuing a Masters in Education with hopes of becoming a teacher.
My professional civilian career includes roles in logistics, distribution, and consumer product sales with companies like Vivendi Waters, Nestle, and Pepsi-Cola. Those organizations gifted me with some excellent training that I still use today in consumer behavior and crises management. But I can honestly say the greatest lessons I’ve learned have come from the 15 years here at Transworld Business Advisors. It is here that I found my passion and here that I have excelled. As I write this e-book, I have sold exactly 260 businesses for a total of $50,400,000 dollars in market value.
I am company record holder in deal volume, having sold more than any other agent in the entire company that spans nine countries and 200 plus offices. Every year (barring the year my son was born) I have completed over 20 transactions. To give you a baseline, a successful broker averages six to 10 deals per annum. I thought, ”There has to be a way to share my knowledge; I have been able to successfully navigate a process that has an unusually high failure rate. What do I know that will be of value to others?”
The volume of my deals is in fact a true anomaly. I have been called the “Walmart” of business brokers and a “freak” due to the volume and productivity. But this volume is indicative of an intrinsic understanding of the market and the safest way to successfully navigate the buying and selling process. A full 50% of deals die before ever getting to the closing table and many die once they are there. We at Transworld crafted the steps laid out in these pages as the best way to navigate the buying process in the safest way for both buyer and seller. In the following pages you will find our Eight Step Buying Process. Imbedded in the pages are links to helpful websites for further explanation. We included a Glossary at the end of the eBook. You will also be able to find this book by chapter on my sound cloud page (links to each chapter are in the title of each step).
Please feel free to share this document with friends and others thinking of buying a business. Should you find it helpful or should you have questions, comments or criticisms contact me freely here.
Michael Shea
CONTENTS
Page 2: Introduction
Page 4: Taking Charge
Page 5–7: Your Team
Page 8–9: Evaluation
Page 10: Education
Page 11–12: The Search
Page 12: The Offer
Pag 13–14: Due Diligence
Page 15: Closing
Page 16: Post Closing
Page 17- 20: Glossary
STEP 1: TAKING CHARGE
You have made the decision to control your financial future by purchasing a business. Owning a business is a great way to build wealth and take charge of your own destiny. Congratulations are in order but you should be wary and frankly somewhat hesitant at taking on this endeavor. Make no mistake — business ownership and/or entrepreneurship is not for everyone. You should do some serious soul searching with regard to your skills, passions, maturity, and your support system as you contemplate this decision. However, once you make it……you must be all in and TAKE CHARGE.
So let’s talk a bit about this TAKE CHARGE thing. Being a business owner by definition means that you and you alone are in control of each and every element of what goes on in your business. For those who have not worked for themselves or owned a company before, this may seem somewhat of a novel concept. It is critical to understand if you are to successfully navigate the buying process and even more importantly the running of your company / business.
Taking Charge (Leadership) is not often talked about in the context of buying a business but I think it vital and since this is my book I get to talk about it. You will be the person writing the check at the closing and the one running the business long after your broker, your cpa, and your attorney are gone. So as you embark on this process, be the one in control of your business and the people you employ.
To begin this process, you will be putting together a team of professionals to assist you: Attorney, Business Broker and CPA. These three professionals each have a specific role to play and you as the business owner/ leader need to manage them, lead them and direct them. Think of yourself as the head coach of a football team. You may delegate authority, you may allow a quarterback to call plays, but you and you alone as the head coach are in charge of the winning or losing. The OUTCOMES are your responsibility. You are not going to be able to blame others if something goes wrong so be IN CHARGE.
As you hire your team of advisors, be careful that you understand their roles, the scope of their expertise, and delineate clear guidelines as to your expectations for their performance and communication with one another. One of the major mistakes made with first time buyers is defaulting leadership to one professional and not setting solid ground rules for respect and professionalism amongst your team. Solid leadership from you is critical. With that in place, you can achieve the objective of navigating this process and buying the business you want.
Let’s talk about your team:
a. The Attorney: Your attorney is a fiduciary. This means he or she has an obligation to work on your best behalf. There are good attorneys and bad attorneys -as in every profession-so choosing the right one is critical. The attorney has a responsibility to act in your best interest while simultaneously getting the deal done. The skills needed to walk this fine line are rare indeed, so as you interview counsel speak directly to this point and ensure he/she will communicate proactively and be accessible and available. Don’t be afraid to ask for examples of how they navigate the process.
Some things to consider when securing buy side legal counsel:
i. Will you have direct contact with the attorney or their para legal?
ii. Are they familiar with the Business Brokers of Florida Forms & Contracts?
iii. Are They available after hours?
iv. Do they contract for a flat fee or hourly rates (how is the hour calculated?)
v. Have they worked with the brokers in the deal?
vi. Will they give you references you can call?
vii. Is this a Swiss Army Knife Attorney (do they practice multi-specialty law or are they focused in on Business specifically?)
viii. Reasonableness: being a fiduciary but a solution minded one
ix. Temperament & Experience: Professionalism in Negotiation / Battle Scars
x. Licensed in Florida: Familiar with the laws respective to the state and counties involved.
Keep in mind your objective is to BUY a business. This is different from real estate where a distress doesn’t negate the real property value and the negotiation can be somewhat hostile. Deals that are at arms-length and involving good will warrant a softer touch. Hiring the loudest, meanest, nastiest attorney may not be the right thing for a deal. Pick the right tool for the job.
One of the nice things about Florida is the Marketplace has facilitated norms of behavior. Legal fees as a consequence which formerly were quite high, are somewhat mitigated to a low number. Therefore, flat fees for transactions and standard forms have limited the hours attorneys have to spend reviewing and revising. Keep in mind that having attorneys familiar with forms and the players involved (opposing counsel, brokers, closing attorneys) also mitigates fees.
Be respectful of your attorneys’ time. When a flat fee is negotiated, it is assumed there will be a level of work paired to the deal in question. Realize you are one of many clients (an important one…but one). If you do not get a flat fee negotiated and are billed by the hour, have all your questioned grouped and ready and use your time with counsel wisely. Talking about the latest soccer match or the weather is on the clock. The time you waste there is still billed. If you do not have an attorney of your own, your broker or CPA should give you a list of several or you can look up the affiliate members of the Business Brokers of Florida. Lawyers should not veer from their lane. They should not be giving business advice or financial / tax advice. Insure your attorney knows the duties performed by the closing attorney (outlined in the standard purchase agreement) so you are not getting double billed.
b. CPA: Your CPA (there is a difference from an accountant) is also a fiduciary. His or her job is to vet the numbers and state facts. The mathematical facts are their purview. CPAs are paid by the hour or flat fee and success is not a factor for them. As with the attorney, you should seek referrals and speak with prior customers to ensure a good fit for you and the deal in question.
The professional you choose should understand the industry in question and have actually dealt with customers in that venue. Believe it or not, there are subtleties to businesses that do not show up on a balance sheet and may be important to know. For example, if you hire an accountant to look at vacation rental management companies here in Florida, and he or she is a personal tax accountant in Wisconsin something important may be overlooked. That something could be critical to your financial health. Choose wisely and make an informed decision. Some tips include:
i. Is he or she a CPA or Accountant: What is the difference?
ii. What is their band width to handle due diligence and how fast can they do it?
iii. Definition of scope of work for the Due Diligence
iv. What will be the fee? Hourly or Flat?
v. Are they familiar with the software involved in this transaction?
vi. Access for Communication with attorneys and brokers?
vii. Are they familiar with the brokers and attorneys involved?
viii. Ongoing support post engagement for taxes?
ix. Do they set up entities?
Trouble ensues with CPAs when they overstep their professional responsibilities by offering opinions on prices of businesses. Since they are fiduciaries, why should this cause a problem? To begin, there are several ways to value a business and more often than not they use a method different than the prevailing market method. As fiduciaries, they may state a price that is favorable to you as a buyer…but the seller and the market have a different value in mind making the CPA opinion irrelevant. In Florida, you have the ability to obtain comparable sales from the Business Brokers of Florida. Just ask your broker to run a report by sales, owner benefit, and the physical area. You can even have the subject listing compared graphically to the comps to help you visualize it. Keep in mind supply and demand factor into this process as well.
c. Business Broker: Of the three professionals on your team, this one is the one you with whom you will spend most of your time. They are not fiduciaries, rather they are contingency based (i.e. they only get paid if you buy) Transaction Brokers predominantly. In the state of Florida, Business Brokerage is a Real Estate Service so your broker / agent needs to be a Licensed Real Estate professional. You can check to see if he/she is licensed with the state at the Florida DBPR . You can negotiate a fee to have the broker paid up front or to function as a fiduciary but due to the risk incurred it can be expensive. As with lawyers and accountants you should interview broker prospects. I did a video years ago entitled “10 Questions You Should Ask Your Broker Before Engaging Them” . Take a moment to watch the clip. The main take away is that the broker is success based. They are transaction brokers, which means they have to act honestly and disclose all matters pertinent to the transaction. They, just like the others should be able to put you in contact with prior clients for referral. They are your access portal to information as they have access to the comps and the listings. Brokers live in the market. A good one can help immensely. A bad one can crater a deal just by being involved. The broker you choose should be full time in the business — not someone doing this as a hobby! If you hire based on price, likability or anything other than a track record of excellence you will get exactly what you pay for. Some benchmarks for you to think about with regard to business brokers:
i. They generally do not do real estate
ii. A good broker does a minimum of 10 transactions per year
iii. Co-broker percentage is a great question: it’s a measure of deal making
iv. Time in the desert: average time in the business is less than a year so the old dogs have survived the tough times.
v. Are They Full Time?
vi. How skilled are they in technology?
Now that you know the roles of your team members it is your responsibility to make sure they all work together. It is an optimal scenario if they have worked together in the past so there is no disconnect. You need to recognize each professional’s personal value. If you favor one over the other, chances are you made a bad choice. In that case, its on you to repair the disconnect or change the team members. You are in control now and you and your business broker will begin the next step of the Buying Process.
STEP 2: EVALUATION
After meeting and interviewing attorneys, accountants, and brokers and having chosen a team, the buyer should sit down with the Business Broker (hopefully a Transworld Agent) in person; however, given the international nature of the buyer market in Florida Skype or Facetime is an acceptable mode of communication. I have found that a face-to-face conversation -even virtually -allows both parties to truly understand and communicate with each other. At this “in- person” meeting, detailed information with regard to the buyer should be gathered. It’s natural to want to jump headfirst into the search process but if you have picked the right broker and that person is truly serving you as an advisor he or she will need to know a lot of things about you. Things I like to know when I meet with buyers include but are not limited to: professional background, reason for transition, financial position, family makeup (seems odd but age and needs of children can impact some dynamics) Visa / immigration criteria, language skills, employability of spouse vs purchaser, horizon issues / exit planning, industry likes and dislikes and much more. Evaluation of a purchase is as much about having a good understanding of the purchaser so the broker can make a good, long-term match. The buyer interview is critical because if truth and trust is not established upfront between the parties, it is quite likely the deal will not happen.
A common scenario here in Florida is related to immigration from E2 and Non -Treaty Countries. Right or wrong, there is a plethora of misinformation on the internet about what is involved in these transactions. In addition to the legal dynamics at play (both real and perceived) there are sometimes cultural barriers associated with perceptions. Here is just one example we encountered recently: A family was buying a business. The family had children with special needs. One child was going to be a partner (over 18 years old) in the business and also had special needs but was quite high functioning. Those types of subtleties/nuances needed to be addressed in the business plan for the immigration visa as well as in the search process to insure the target company reflected the lifestyle requirements and skills of the family members. Not all searches require that level of introspection. Things we have seen however include:
a. Handicapped Purchasers: Clients with physical limitations
b. Religious restrictions: Bars are often off limits for some customers
c. Lifestyle requirements (no weekends): I left the corporate world for an easier life
d. Family Needs: Young children
Once the interview is complete, your broker should take time to familiarize you with the various websites you can search and forms with which you will need to be familiar. They should provide you copies of these and go through them all with you in detail. As for the websites in Florida, it is best to stick with the Multiple Listing Service. The other sites are for pay sites. The MLS will have the listings of all the brokers and members of the Business Brokers of Florida all have access to all the listings. The MLS has the most integrity and is the easiest platform to use. For example, on bizbuysell you have most of the same listings but do not have the ability to filter the listings by financial form used for the numbers presented. This is critical; although there are about 500 businesses for sale in greater Orlando only about 20% have tax returns as the source for the numbers represented. That would be an important factor to know before you start down the path of inquiry, confidentiality forms, interviews etc. That doesn’t necessarily mean they don’t have books and records. It just means for some reason the broker didn’t use them for the listing advertisement. It is however a flag that should catch your attention.
To further illustrate how tough the buying process is for buyers, here is a sobering statistic: 90% of all buyers (defined as those who inquire on a listing) never complete the buying process. One of the key elements that stop the ball from rolling is frustration. The Evaluation Step is critical as it provides the needed filter to achieve your goals as a buyer. Seek out knowledge from multiple sources like The Deal Board Podcast , numerous books written on the subject, YouTube channels, the advice of trusted, respected advisors, and even course work from people like Richard Parker with DIOMO.
STEP 3: EDUCATION:
You will not feel comfortable making a decision until you fully understand what it takes to buy and run a business. I take great pains to talk about all the moving parts, variables, risks, rewards, challenges, triumphs and uncertainties. Buying a business is a risky proposition and educating yourself about the process and the industry are vital. Part of your job as a buyer is to be an active learner and researcher. Buying a business is not a part time job. It should involve a ton of reading and solid research. Your Business Broker can provide lots of information to assist you like: Listings Comps, Sold Comps, Review of sold transaction and business similar to the target you are looking at, access to the BBF data, access to Peer Comps. He/she should point you toward solid resources like “How to Buy A Good Business At A Great Price” and most importantly anecdotal information as a result of years of experience. Your broker should have the heart of a teacher. It is his or her responsibility to educate you on this process and give you as many resources to help you navigate it safely without having to trust blindly in any one “expert.” In today’s tech savvy world, information is available everywhere, immediately, at your fingertips. Here are two podcasts you may find helpful for starters: The Deal Board and my Soundcloud page .
Finally, don’t think that business is some overly complicated discipline filled with fancy words and secrets hidden by old men in white suits. If you are a competent adult with solid instincts who exercises good judgment you will be able to learn and navigate this process. However, you must continue to educate yourself and evolve as you run your business because business is ever changing. Just Ask Sears.
STEP 4: THE SEARCH: Now the hard work really begins. I want to take a moment to talk about why THE SEARCH is step 4 and why EDUCATION step 3. If I were to hazard a guess, I’d say well over 90% of buyers begin with Searching before they do anything else. This is why a staggering 90% of all business buyers (defined as those who send an inquiry in) never ever complete a transaction. Searching on the various web portals and papers can be a “rabbit hole” experience with twists and turns that confuse, disappoint, and muddy what should be a simple process. Our process is a tried and true method that keeps you on a path to success and allows you to navigate the difficult and sometimes disappointing aspects associated with crafting the meeting of the minds to finally close the deal. So back to THE SEARCH.
Let us paint the picture of the market place. There are approximately a dozen or so major websites that list businesses with more coming and going on a daily basis. The following are the major ones for your reference: BIZBUYSELL , BUSINESSBROKER.NET , DEALSTREAM, BUSINESSESFORSALE.COM , IBBA , BBFMLS, GLOBALBX.COM , LOOPNET , MERGERPLACE , BUSINESSMART , BIZMARKETFLORIDA , AND BIZQUEST . Several of these sites are owned by one company and each is a business with its own agenda to play in the market. I would also encourage you to consider the Transworld site as we are the largest brokerage and carry several thousand businesses in our portfolio as well.
Since this book is about BUYING A BUSINESS IN FLORIDA. I want to give you a hint that will save you much time and effort. Florida is the only state in the US that has a Multiple Listing Service where brokers who are members of the trade association are mandated to share information. It is called the Business Brokers of Florida. At least from a Transworld Business Advisors perspective, every one of our listings appears on all these sites. For the most part, the other reputable brokers appear on the major sites like BIZBUYSELL and BUSINESSBROKER.NET (as a side note, when the day comes to sell a business you need to ask on which sites a broker lists. If they are not on all the sites, are they really the right broker for you?). You will use the BBFMLS.com as your primary search portal. It has the easiest search filters, it is the listing portal the agents in Florida live on and you will find a higher level of cooperation amongst these agents as there is a standard of conduct and commonality in understanding.
So now that we got that out of the way here are some tips:
· Ignore the prices: Every seller lists high as they want room for negotiation. Many brokers are afraid to tell sellers the truth or do not know how to determine multiples. Understand this: the average business lists at a 3 multiple in Florida and Sells at a 1.89 multiple of cash flow. IGNORE THE PRICE…the business is worth what it is worth to you and what the market says it is worth. You get to make the buying decision but the market determines the price.
· Search by profit / cash flow: You are buying income and you have to eat. At the end of the day the income is the prime factor to be considered. Location, industry, etc., etc., etc., are secondary. Here is a cool statistic: 80% of buyers do not buy what they first approach. As they go through the process, they find out their skillset and talents make them perfect owners of a business they never envisioned before.
· Embrace the Surprise: Instinct leads you to what is familiar but you may find your talents enhance an industry or a business that had never been on your radar. Your skills could be the ones presently lacking in an industry ripe for the taking.
· Plan the Exit: Learn from this process and recognize you may have to sell someday. Temper your passion for English Tea Rooms with the realities of the market and the need to cash out eventually. Immigration, age of children and retirement age are all factors of the life cycle. You need to be able to exit when you decide the time is right.
· Know what you don’t know: This is what they call in the corporate world a SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats). Be Practical and understand how your personal SWOT and the business SWOT match up.
· The 3 P’s : Patience, Perspective, and Practicality. The most expeditious way to navigate this buying process is to follow the process. Do not deviate; cut your losses quick and live in reality.
· The Market & Reasonable / You Can’t Fix Stupid: Deals sell when they are in the “box,” which means when they and the terms of the deal meet the norms of the market. A good broker can spot good or bad in seconds and knows when to cut bait quick. The problem is the broker is not in charge…YOU are. Hire a broker with experience who knows when to pullout as he or she is the only one that gets paid for closing the deal. Believe it or not your lawyer and cpa get paid even if the deal tanks. The comps are there to gauge balance and with regard to banked deals everyone knows what can and cannot be done on the lending front. The key phrase to remember is “you can’t fix stupid.”
Once you have identified a business of interest you will get to review an overview document called a Business Listing Information Sheet or BLI.
The amount of information you get at a buyer / seller meeting is dependent upon several factors. But be forewarned — you will not get the chance to do due diligence prior to making an offer. If you are lucky, you will get some information in terms of financials but by no means all of it. Think of it like buying a house. You do not get to inspect the house prior to an offer that is accepted. The same holds true in business transactions. You make a contingent offer based on due diligence. Then you get to do the due diligence.
STEP 5: OFFER
Here is where collective experience really matters. The expertise of having actually completed thousands of deals is not to be under estimated. Here in Florida there are so many deals done by agents in the BBF that there are standard contracts drawn up by a team of attorneys to help you keep your legal fees to a minimum by simply redrafting standard docs. Letters of Intent are commonly discussed but for 99% of main street deals they are not encouraged. I am not dispensing legal advice but recognize as a buyer they are viewed by sellers and sellers’ brokers as a waste of time. They usually are one sided, they are not binding on sellers, and generally result in the associated expense of drawing up a purchase agreement from scratch. We do see these in larger deals where the terms are more complicated.
Once your offer is tendered (deposit may go with offer or be put in post acceptance) it will be countered, accepted, or declined. The amount of back and forth is typically minimal; it is unusual to see a lot of haggling at this point. When the offer is accepted and a deposit has been given, we go to the next step…DUE DILIGENCE.
STEP 6: DUE DILIGENCE:
This is the period where you fully inspect the owner’s representations to ensure accuracy. Your broker will coordinate the efforts with your legal and accounting professionals and strive to satisfy all contingencies written into the contract. A point of note here is that the professionals performing due diligence should have some competency in the vertical you are buying. For example, if your CPA has no experience in the manufacturing business and does not understand work in progress (WIP) a critical, relevant element of the deal may be overlooked. You want to make sure communications go through one central individual (the broker) and that a record of said communications is compiled and recorded. Your business broker does not do due diligence nor would a smart one try to but (assuming some depth of experience) will contribute by providing valuable resources and insights from past deals. There will be your personal due diligence, your legal due diligence, and then if financing is involved some financial due diligence of a different scope from your bank.
A word of advice: your business broker can give you information but please do not ask him or her to give you financial advice. It is not in the job description as a Transacation Broker to give you such advice. Anyone offering up this kind of information is frankly stepping outside the scope of the normal, appropriate practice. This is the arena where your CPA and lawyer start earning their pay. You will get an initial due diligence list from your CPA and attorney. Try to make this list as complete as possible. Deal fatigue can set in with repeated requests for information, so tight and succinct is better. Also, if you are gathering information related to immigration, you should be requesting these items at the same time (there are some overlapping items). Good businesses are rare so it is never a buyer’s market when you have a good business. Respect the seller and they will respect you and the process. Here are some tips related to managing due diligence:
· All Items should be collated through your broker and consolidated in a central location (drop box or share drive)
· A definitive period should be set for due diligence: Open-ended timelines lead to deal fatigue and you must create urgency for CPA’s and attorneys to move with a purpose and accountability (Time Kills Deals). Watch the clock and know when due diligence ends.
· If you need more time ask for it.
· Make sure your team knows the time line and moves with a purpose.
· You as a buyer should spot-check your professionals’ work. You are the client and presumably can add and subtract. Be active. Ask Questions.
· There is no such thing as the perfect business — all businesses have warts. Look at the business in its entirety and make your decision to go forward on the due diligence report.
· You will be asked to put a deposit down prior to due diligence. Not putting one down says your’ not serious. The deposit is going to be contingent on you signing off on the due diligence.
STEP 7: CLOSING
Final preparations will be made for lease transfer, utility transfer, financing, merchant account transfer, licensing, inventory counts, and a ton of other items that all occur at the last minute. Remember, the seller is running a business all the way up to closing. This makes the final moments complicated, often requiring a lot of attention to detail. Each player has an assigned role and must do what is expected when it is expected. Your broker is the Bird Dog of this process. In Step One I discussed roles and responsibilities and mentioned how important it was for you to understand them and reinforce them…here is where the rubber meets the road.
Someone has to coordinate all these moving parts and be strong enough to make sure everyone involved in the deal does what is required for success. If you think this part is easy, you couldn’t be more mistaken. So your job is CRUCIAL: Hire the right team in step one and make sure the parties understand the urgency of communication and timely execution. Empower the broker to do his or her job and ensure those not on board with the process understand what’s needed of them. A smooth close looks easy but given that fewer than 50% of deals close, the numbers say otherwise. Deals can and do die all the way up to the closing. There are legions of examples we can share with you where deals fell apart due to preventable factors. Just ask us over a beer and we will gladly share them! At the end of the day, a deal goes south because someone failed to follow the process step by step.
STEP 8: POST CLOSING
Way back in Step Five, we talked about preparing and presenting an offer. One of the clauses in that document will be the training and transition period. This transitional training can be as short as a day and as long as a year depending on the business and its complexity. It may include meetings with employees and clients, technical education, franchise training, computer updating, transfer of intellectual property and knowledge, transfer of utilities, transfer of websites & communications portals, and then the actual training as to the day to day operating of the business. Each industry has its special nuances and requirements (one more reason a seasoned brokerage is critical). Your broker should not just disappear once the deal is done. He or she should be a resource to point out elements of focus for you during transition and should share successful strategies and communications they have experienced over the years. Remember, the one person who has been through this process numerous times is hopefully your broker. Your business broker will be able to give you multiple options and solutions to the inevitable hic-ups that occur. Call us without hesitation; our commitment to you is one of trusted advisor. We will go the distance.
GLOSSARY OF HELPFUL TERMS AND RESOURCES:
BLI: The one page listing information sheet provided from the Business Brokers of Florida MLS System
E2 Visa: A type of immigration status visa used by certain treaty countries to purchase a business and get status in the US
L1 Visa: A type of immigration status visa used by certain countries to purchase a business and get status in the US
EB5 Visa: A type of immigration status visa used by certain countries to purchase a business and get status in the US
Transaction Broker: a limited form of representation assisting both a buyer and seller in the completion of a transaction.
Single Agent: a type of brokerage relationship an agent can have with specific duties including: Dealing honestly and fairly, Loyalty, Confidentiality, Obedience, Full disclosure, Accounting for all funds, Skill, care, and diligence in the transaction, Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing; and Disclosing all known facts that materially affect the value of residential real property and are not readily observable
Fiduciary: A person who holds a legal or ethical relationship of trust with one or more other parties
CPA: A certification for an accountant. There is a fiduciary relationship associated with CPA’s
Recast: The accepted accounting principle of removing or adjusting items on your financial statements that are unrelated to the ongoing business
Owner Benefit: The pretax and pre-interest profits before non-cash expenses, one owner’s benefits, one time investments, and any non-related income or expenses. Also known as SDE or SDI (sellers discretionary earnings / income
Sellers Discretionary Income / SDE: The pretax and pre-interest profits before non-cash expenses, one owner’s benefits, one time investments, and any non-related income or expenses
Cash Flow: The net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow
EBITDA: In simplest terms it is the sum of the earnings before interest, taxes, depreciation and amortization. Different from SDE or Owner Benefit, EBITDA multiples are higher and do not account for owner salary. Primarily used for larger businesses and M&A transactions
Due Diligence: The period post -accepted offer when a buyer gets to review the financials and records of the target business to determine if representations are accurate
Contingency: A clause that must be fulfilled in a contract or waived by a party
BRG / Business Reference Guide: A resource compiled by business brokers annually listing pertinent information regarding types of businesses including but not limited to rules of thumb, common metrics and percentages relevant to the business and industry.
Pratts Stats: Another resource available for purchase which includes recent sales by vertical, category, revenue and profits
IBBA: The International Business Brokers Association. This is the largest association of business brokers in the world. Offers training to brokers to get CBI (certified business intermediary certification)
CBI: Certified Business Intermediary earned by completion of coursework from IBBA
CMAP: Certified Mergers & Acquisitions Professional: Earned subsequent to completion of coursework at Kennesaw State University in concert with the M&A Source.
M&AMI: Master Mergers Intermediary: Performance Driven earned through completed CBI Certification and proof of closure of Multiple Deals over 1 Million Dollars
BBF: Business Brokers of Florida. Largest Business Brokerage and sponsor of the BBFMLS listing platform
BCI: Awarded by Business Brokers of Florida. Earned as a result of completed coursework from IBBA and completion of over 12 transactions.
LOI / Letter of Intent: A non-binding document outlining the general terms and price under which a buyer proposes to purchase the assets of a particular business. If signed by the seller, it indicates that both parties intend to move forward in completing the transaction
PSA / Purchase and Sales Agreement: A purchase and sales agreement. There are commonly two versions used in central Florida. One from the Business Brokers of Florida and the other version used by Transworld Business Advisors
Addendum: An agreed-upon addition to the original contract signed by all parties. It details the specific terms, clauses, sections and definitions to be changed in the original contract but otherwise leaves it in full force and effect. Key is in addition to the existing contract
Rider: A rider is often used to add specific detail and especially specific conditions to a standard contract such as an insurance contract
Closing / Transaction Attorney: An attorney / agent preparing and executing the closing transaction. Not working for either party as a fiduciary nor providing legal advice. Fees for closing traditionally split by both parties unless negotiated otherwise
Occupational Licenses / Business Tax Receipt: Otherwise known as a business license, this is a tax from the county or municipality where business is located authorizing your business to conduct trade
4cop / 2cop / SRX: Liquor License types commonly associated with business transactions in Florida. They are respectively full liquor, beer and wine, and a full liquor license for an establishment meeting a minimum number of seats and where over 50% of the revenue is from food
NDA/ Non Disclosure Form: A document used by parties in a transaction to secure the confidentiality of the information shared and nature of the process and facts pertinent to the deal
The following two pages are the standard nda / non disclosure form and BLI / Business Listing Info Sheet in Florida
