It is important to protect yourself from forfeiting your deposit when you sign a purchase contract. This would seem to be a very obvious statement. Except, what is not obvious is that so few people know how to do that. The result of inexperience is that too many people lose their purchase deposit. The deposit checks vary from $5,000 to $50,000 or even more. Read more
Buying a Smog Shop in California
There are millions of cars that need a smog check every year in California. So buying a smog shop can be a good investment, or it can be a bad choice. How can you tell if it is a good idea?
The State of California allows smog centers to either test the car’s emissions or to repair the car to meet the requirements. The Department of Consumer Affairs/Bureau of Automotive Repair directs vehicles that are more likely to fail, called high emitter profile, to a Test Only Center.
What is High Emitter Profile? Read more
Upfront Appraisal or Valuation Fees by Business Brokers
I live in California, where upfront fees are illegal. The way brokers can get around this in California is to charge for an appraisal and be paid for it. After the appraisal is completed, the broker can ask for and receive a listing. If the listing is given before the appraisal is done and paid for it is illegal. Or done as a condition of the listing it is considered an upfront fee and again is illegal.
As a CPA, I have found that most business books are not in a marketable form. I would therefor charge an accounting fee for putting the books in proper form. I might also charge for a CPA business evaluation. This would be usable for any business purpose in addition to selling a business.
Why More People Do not buy a business?
You may not believe what they say yourself, but if you have been in the business of buying businesses for a long time you’ve heard someone repeat this time worn statement.
“One in 14 buyers actually buys a business.”
The business brokerage industry throws around this number all the time.
This “1 in 14” number (or only 7% ) is based on statistics gathered from some old-time brokers. They must have actually kept track of how many buyers called their firms versus how many deals they closed. We can’t know how well they tracked this info, or where this data originated from. But, thankfully, the actual number is not the important part. For the sake of solving the problem, we just need to see that it’s low, and really could be better.
Here’s why that number stays so low… Read more
What Motivates a Business Seller?
When working with buyers as a business broker and a CPA doing due diligence, the buyers universally ask one question. “Why is the seller getting out?
This is a good question but the question I ask is, “How do you know if the seller is telling you the truth?” Read more
I have been a business broker for 25 years, and after selling hundreds of businesses, I have some very strong feeling about successful business owners selling their businesses.
Story #1: Abe Michlin (my father) and his recycling business.
Dad died in November 2016 at 96 years old. His primary goal for the since 1980 was to turn the business over to one of the children or grandchildren. Which person that would be changed every few years. When I was in college, I thought it would be me. But by the time I was 27 years old, and my mother died, it became clear that I had bigger dreams then my dad. I left to become a buyer of foreclosure real estate, and make my first small fortune. My brother-in-law, Jerry came into the business along with Shana, my new step-sister. Jerry ran sales and production. Shana ran the office and handled anything dad needed to be done. Dad ran the business but on a part time basis. His new wife wanted dad to smell the roses and see that there was more to life then business. Dad loved business and regretted every retiring at all, even when he physically and mentally was forced to.
From 1980 to 2005 he planned his exit strategy.
How to handle brokers wanting offers before due diligence
We have all heard of “The battle of the sexes”. What is not as well-known but as difficult a battle “is the one between “brokers and business buyers” regarding getting a business’s financial information.
This article will discuss:
1. How to get listing brokers to release the required information you need in order to determine if you have any interest at all in making an offer. Regardless of what you are willing to pay.
2. If that does not work, how to make a level playing field so you are willing to write a deposit check with a Letter of Intent (LOI) or Purchase Agreement. Read more
Hard to believe, but restaurants, fast food and other types of food manufacturing or food distribution businesses compose fifty percent of all small businesses sold. Fifty percent! This means a lot of you buyers are buying restaurants.
Many business buyers have the idea that they will buy a small business to create a second income. The idea is to put in 10 hours a week, or less doing the management functions such as, posting the quick books, making sure the employment forms are filled out correctly and are complete. Lastly they know they have to Read more
This is a true story of one of my assignments regarding a Laundromat in Los Angeles County. This story has turned out to be one of the most fascinating tales I have ever heard.
I was not brought in before the purchase but 3 years later when problems arose to be an expert witness. Read more
Willard Michlin, CPA, CBB, CFE
California Licensed Real Estate Broker #00529559
Certified Public Accountant (CPA) # 106752
Certified Fraud Examiner (CFE) #594927
Professional Certified Business Broker (CBB) designation
For Business Due Diligence and Consulting Services
Business Buying Services
PO Box 2734, Seal Beach, CA 90740-2734