About the Author and Creator of the Fortt Business Guide
Reflections of an ol’ Business Broker:
 Let me say at the onset that I have felt
somewhat uncomfortable during the past 12 years about naming the Fortt Business
Guide & Real Estate Tutorial after myself. This is because there are
many outstanding professionals such as attorneys, accountants, professors, as
well as
many other business and real estate Brokers who have made significant written
contributions about various business & real estate subjects, many of these
individuals being experts in their respective fields. Even so, I gave
in to the insistence of friends and advisers because they felt my name on the
title would emphasize the “hands on” experiences of a business &
real estate Broker (WA & OR) compared to these others who may have never
consummated a business or building transfer of ownership from start to finish.
About 13 years ago I received a very nice compliment
from a Seller’s business (Seattle) attorney who stated to my (our) client that
"my Purchase & Sale Agreement was the best one that he had
ever been exposed to in his 30 years of business law practice." Since then I have
made a
zillion improvements to this Agreement & supporting Exhibits as the result of
continuing usage. I decided at that time to share this
format along with my business Brokerage experiences with people who are
interested in buying or selling medium sized businesses. Of course, I never
realize then the Fortt
Business Guide & Real Estate Tutorial would
later grow to 5,000 ++++ pages now contained in Word, Excel and Webpage 1.120 files
while consuming all of my spare time, having spent thousands of hours
in the process.
Indeed, I am one of few professionals involved in transferring ownerships of
businesses and buildings, one who has actually spent 40 years “in the trenches” with
Purchasers,
Sellers, attorneys, accountants, Escrow firms, etc., during such times I incurred good and some terrible experiences
(and everything in
between) as a Business, Real Estate & Commercial loan Broker, who is willing
to share this knowledge. I
consummated hundreds of business and real estate transfers during these past
decades.
Now finally, you have found a business & real estate Broker who is willing to share these
"hands on" experiences with you, versus reviewing the thoughts of some
professional or other professionals who perhaps had never left the confines of an
air conditioned office.
Hundreds of times during these past 40 years of selling businesses and
buildings or whenever business or real estate negotiations would surface with
problems and/or just with good ideas, I would immediately return to my office to incorporate
these new thoughts, ideas and/or changes into my Fortt Business Guide program
files (or create new files) only because I wanted to be better prepared for my
next business or building sale, never realizing until many years later that I
would someday share these great ideas with business
Purchasers and Sellers, business people like yourself who is seeking good advice and answers
without "breaking the bank" by paying for professional advice at $250.00 per hour,
perhaps "racking up" thousands of dollars in professional fees.
However, $250.00 plus per hour could indeed be a very reasonable price to pay for good advice that could
save your investment or save your business equity. Even so, this could become very
expensive if you could perform this "due diligence" by
yourself...............then have the attorney conduct his final review. .
Many of my ideas and formats were derived from fine attorneys, accountants, and other professionals
that surfaced during these business transfers. Some of these formats were created and/or
modified with some sentences written in blood as the result of poor or bad
experiences that surfaced while “putting together” a business or building ownership
transfer; latent problems that should have been disclosed prior to an Escrow
closing; NOT to float to the surface after a closing when a new business owner
has assumed
command. Most of these issues could have been disclosed through a
proper “due diligence”
and/or by an expose’ type Purchase & Sale Agreement that would protect a
Purchaser.
Fortunately, these Buyer/Seller problems & concerns have been far less
frequent over the past several years as I have acquired greater experience that I am now sharing with you.
Incidentally, If I find a "good" businessman to join my Brokerage office it
still requires a couple of years for him to understand the business Brokerage
process of understanding Buyer & Seller needs, writing up the instruments, understanding
building/space requirements, Leasehold & Fee Simple - not because my
Business Brokerage niche is so
complicated but primarily to having so many areas to be concerned about, any one
of which could ruin another wise "good" acquisition or sale.
This is one reason there are 3,600 (+/-) Business Brokers in the USA while there
are 1,400,000 (2007) Real Estate Agents.
Even with good "due
diligence" coupled with an expose' type Purchase & Sale Agreement, problems may still
surface. This is why if you are a Purchaser you need to have a "tight"
Purchase & Sale Agreement (plus supporting Exhibits) so that you can recover
your losses caused by fraud, misrepresentation that were possibly due to a
Seller's "amnesia" about assets, bad/obsolete inventory, diminished earnings,
defective equipment, and/or "cooked financials." And conversely a Seller
needs to have a well written Purchase & Sale Agreement just to prevent a
disgruntled Purchaser (now your disgruntled business owner) to claim that you
never informed him about all the issues & concerns that were disclosed - and now
is seeking legal counsel to rescind the sale. Of course, if some of the
employees who remained after the ownership transfer
did not particularly like the previous owner for one reason or another, well
that could open up an interesting "bucket of worms."
When you purchase the Fortt Business Guide & Real Estate Tutorial, you
will be acquiring my decades of
brokerage experiences; a true smorgasbord of valuable information and formats that will help
you successfully buy, sell, value, and/or operate a business and/or real estate building
or space. In
addition there is also included a “Readers Digest” collection of great short articles
about a multitude of different business subjects.
My 1st Fortt Business Guide contained 150 files of Word & some Excel formats
that
sold at the same low price as today with very few people ever requesting a refund during
these past many years; such as a request from someone who thought he or she was buying a
3,500
page hardback book and was surprised at receiving a CD..
Although I generally commence the
business transfer process with a Letter
of Intent because if a Purchaser and/or
Seller cannot agree upon a major issue such as price and terms, or
the terms of a lease, as
examples, why
then spend many hours preparing a Purchase & Sale Agreement and supporting
Exhibits or the large amount of money to hire an attorney to create a Purchase & Sale Agreement?
The Purchase & Sales Agreement is of course the most important
document, i.e., the “Blue Print” in the transfer of
a business ownership because the terms and conditions of a Purchase & Sale
becomes the terms and conditions of the final Sales Contract that will be
prepared by an attorney to be closed in Escrow..
The Fortt
Business Guide's professional Purchase & Sale Agreement (separate Agreements
for business and real estate) is very detailed and far superior to the
pre-printed, "slam-bang, sign here boilerplate" Purchase & Sale Agreements
that are still used by some business Brokers and most house Sellers as well as
those that are sold by
book stores and/or on-line by form selling companies. I have also
included several "boilerplate" Purchase & Sale Formats for those of you who want
a "slam bang" sign here agreement for whatever reason, most likely because you
may NOT wish to spend the time that will be required to learn the business that you will be signing
your life away for, and/or have NO concern about paying the price of thousands
of dollars in consulting fees to professionals who will perform this "due
diligence & format preparation for you. Even so, the Fortt
Business Guide has 1,200 (+/-) other files that could be invaluable to you if
for no other reason to use as a reference source.
I feel pre-printed forms are inherently risky because so many issues,
disclosures and concerns are ignored. I have outlined these problems and areas
for concerns in my discussions on
Purchase & Sale Agreements (with Notes) files, and the Purchase & Sale Agreement,
instructions for preparing - Folder. Please read these notes
that I penned alongside many of these clauses contained in the
Purchase & Sale Agreements (with notes) for you should derive some excellent
informative ideas that will help make you into an aware Purchaser or Seller.
Escrow companies love pre-printed aka "boilerplate" forms because of their simplicity, i.e., fill
in the blanks, sign here and “slam-bang” you are out the door after you pay the
Escrow fee, thus leaving the Purchasers & Sellers to contend with the problems that float to
the surface after a closing. Escrow companies close the transaction based upon
the Purchase & Sale Agreement that the Purchaser & Seller created and agreed
upon. Remember these Escrow companies do not create
transactions nor do they represent either party at a closing of Escrow because
they are supposed to be and remain an impartial 3rd party to any transaction! You are on
your own; that is, unless you have a knowledgeable business Broker or a business
lawyer with you or you have had these professionals reviewed your closing documents prior to
the closing of an Escrow.
Furthermore, you have to be
very careful
about Escrow Company boilerplate clauses that can, surprisingly enough, supersede
& negate “iron clad” Agreements that are contained in your Purchase & Sale
Agreement, clauses inserted only to protect the Escrow company from potential
litigation, a lesson well learned one time when my favorite XX business Escrow
company. My Purchaser had demanded tight warranties about the quality &
performance of the business equipment, yet the boilerplate Escrow
Instructions stated that the Purchaser was acquiring all the equipment and inventory
"as is, where is, and with NO warranties." I immediately returned to my office
computer to create another clause for my Fortt Business Guide Purchase & Sale
Agreement that would protect Purchasers & Sellers from any Escrow clause that
would undue their agreements in the Purchase & Sale Agreement, while using my
Purchase & Sale Agreement
anyway. Of course Purchasers and/or Sellers may create mutually agreed to
changes in the Final Closing Document via these Escrow Instructions at Escrow
that will indeed modify (and supersede) the Purchase & Sale Agreement.
Escrow Instructions and other documentation are usually
reviewed & agreed to in haste at an
Escrow closing, not
carefully reviewed beforehand like your Purchase & Sale Agreement, hopefully
word for word, line by line..
Even so, signed amendments at an Escrow company will as heretofore stated
supersede any Agreement that you have previously agreed to. Therefore be
very careful at Escrow - take the time to review your closing papers by yourself
and your business Broker, or take them
to a Business Attorney for review. I like having attorneys review my work
because then I have shifted any potential liability to that
law firm (attorney) who will then not be able to later litigate against me.
I could accept pre-printed forms only because many
(most - if not all) real estate sales agents (and
some business Brokers) do not understand the process of correctly transferring ownership
of a business entity per se,’ i.e., the hard & intangible assets along with the Leasehold agreements.
Therefore these pre-printed forms give the Purchaser and Seller (especially the managing
Broker
- owner or controller of a Brokerage firm) some minimal
“boilerplate” protection from the “loose cannon,” aka rogue Agent, who only desires a quick closing
and a fast commission check.
Therefore it is of paramount importance that a full disclosure of all facets of the
business operation -- past and present -- are agreed to in writing by the
principals to the transaction. This not only protects the Purchaser who received the
full disclosure but the Seller as well who will not have to later worry about
after-closing, perhaps frivolous claims (aka lawsuits) from a Purchaser who says he "didn't know or wasn't
informed,” perhaps whose only true motive was becoming tired of and/or
disappointed with your business for one reason or another, perhaps just
discovering that owning/operating a business is much more work than anticipated.
Why Purchasers & Sellers should care?
Too many Purchasers and
Sellers are “walking the plank” when they buy or sell a business. A
person
can be very successful at operating a business, but perhaps a failure at buying or
selling one. Now you can have your own “in house” business Broker on your staff
to either help you consummate your own business or building ownership transfer or to give you a reference library when and if the need arises for a
quick source of information that should address your concerns.
When you buy or sell a business it is like walking through a minefield because
one misstep can otherwise ruin a fine acquisition or sale. My Fortt Business
Guide is NOT designed to replace your Business Broker, business lawyer or
accountant. However, it will provide YOU with enough information to help make
the right decision about acquiring and/or pricing (32 Valuation files) a
business, selling
(41 electronic MLS sites) and/or
operating a business. It can also prove to be very helpful if you need to verify advice given to you by paid professionals,
or just to help you realize what you do not know in your quest to become an
"informed" Buyer or Seller. You can use the Fortt Business Guide
& Real Estate Tutorial for your own personal business buying/selling reference library.
If you are a Purchaser:
You will be investing a significant amount of
cash in acquiring a business and/or building. A cash investment that most
Purchasers
would not want to lose. You
cannot afford to make an expensive error! You also have to possess enough
knowledge to recognize “professionals” who do not truly understand the process,
and/or to recognize “make work” professionals such as attorneys & accountants
who may also be "deal killers" usually because they do not want to lose a valued client
and/or to "crank up the fee meter" @ $250.00 (+/-) per hour because no
Purchaser or offer will ever be good enough
for a client's business. As a couple of files state, a good attorney or
accountant can be an invaluable asset to your efforts. Even so you need to
be aware of those who have placed their interests ($$$$$) ahead of yours by
creating extra work @ $250.00 & up per hour, perhaps racking up thousands of
dollars in fees. These guys are paid to find fault..........which is
fine.....but you need to keep a "leash" of them if you are concerned about
saving money. My God, letter writing, rewiring Purchase & Sale Agreements,
phone calls........over a period of days or weeks..............is time consuming
an expensive. Your attorney may remake your Agreement so lopsided in your
favor..........that the opposing party will have to hire legal counsel to
rewrite the agreement so that it is not so lopsided. Then the letter
writing & phone calls commence.
When you purchase real estate most of the inherent problems are
usually disclosed prior to closing. These usually surface because of required inspections, title reports and Escrow
preparation of documents. That is, unless fraud was committed. In business
sales, however, usually the subtle & sometimes expensive problems do not surface
until days or weeks after a closing when the Purchaser has assumed ownership & control of the
business entity; usually due to poor due diligence (investigation) by the
Purchaser. When significant problems surface, i.e., bubble to the surface, about earnings (lack of), assets
(missing or defective), inventory (bad, obsolete, and/or expired), defective
equipment, etc., and other
less important concerns, it is usually because of a Seller’s "amnesia" about his “problem free
and profitable"
business.
Let me add there are many very astute Purchasers of buildings and businesses who would rather
acquire a problem infested business or building than a “clean” one. This
is assuming (of
course) they recognize the problems and have the talents and money to resolve
them to their satisfaction – and that the purchase price & terms reflects the
poor condition. This is a great way to acquire a "hot" deal.
Most financials have to have their expenses "restated,"
"recasted," or normalized so that the prospective Purchaser can determine the
"True Discretionary Cash Flow" prior debt, taxes and officer salaries. Let me add that the "bottom line" of a business Profit & Loss
Statement is almost meaningless until the a Purchaser "restates," "recasts," or
"normalizes" the expenses of a given business so that the Purchaser can
determine the "true discretionary cash flow" of a business prior to debt service, taxes and
owner's salaries.
Click here to see the
actual Fortt Business Guide Real Estate Tutorial's Table
Contents referencing 1,120++ files.
Therefore, you need to possess the
investigative skills to dig up these problems during your “due diligence” period
– then negotiate the price as the result of your findings, or decide not acquire
the business and/or building. By performing your own due diligence; rather than hiring a
professional at $250.00 (+/-) per hour,
you will end up with a much better understanding of the
business operation as the result while saving thousands of dollars in the
process. I think a careful due diligence is equally important
that saving fee money, if for no other reason that to acquire a meaningful
understanding of the business that you intend to acquire.
I believe it is a superb idea for a Purchaser to insist upon some Seller financing. This will make the
Seller more interested in your business success,
especially if he wants to see his contract paid off versus a Seller receiving
all cash which will remove any incentive to give you timely advice when needed &
requested. If the Purchaser is paying all cash for a business, he should insist upon
having a 5% or 10%
cash holdback (placed in Escrow say for a period up to 90 days) to cover for any unpaid obligations. If the
Seller receives all cash – he’s down the road and will be much
less likely to expose latent defects & financial obligations and/or be available
for helpful advice about a variety of issues if and when called upon.
The Fortt Business Guide is providing you with information that would take years
of “in the trenches” experiences for you to discover on your own; information
that will soon be readily available at your finger tips. Many of these 1.120
(+/-) files may not pertain to your particular situation, but surely you will
find just one file that could hopefully save “your financial hide.”
If you are a Seller:
You should want a full “up front” disclosure
as well, just so the Purchaser will remain committed to the purchase and thereby
eliminate any future
temptation to undo a sale after closing for whatever “cooked-up” reason.
Furthermore, I’ve
seen too many Brokers “slam-bang” deals for a quick closing then suffer the
consequences afterwards when the Purchasers and Sellers are litigating against each
other and usually against the Broker (“expert”) as well. “Read my
lips,” a fast closing predicated upon a “good ol’ boy” (girl) loosely and/or
poorly written
Agreement will surely cause considerable grief and expense afterwards."
The Fortt Business Guide Purchase & Sale Agreement is mostly (80%) beneficial to the
Purchaser prior to the closing of Escrow albeit the benefits (80%) of this full disclosure is
immediately
shifted to the Seller and the Broker after said closing because the Purchaser
will not be able to
“cook up” some reason for undoing the sale, perhaps taking the Seller
to court with flimsy excuses in an attempt to secure a refund of his down
payment investment and/or possible alleged damages. Of course, the attorneys in any litigation will be the only
ones coming out ahead.
Preamble to the Fortt
Real Estate
tutorial:
As to real estate,
either fee simple or leasehold - if you are buying a business, you will
usually need a building or space to operate out of; that is, unless
you have some sort of mobile business or have a business that you will operate
from your residence.
Because of this, the Fortt Business Guide provides you with numerous methods to
Purchase a building. It also offers a multitude of creative financing ideas (to
raise cash while ideally using the Seller’s assets), along with building inspection ideas
so that will hopefully prevent adverse surprises after a closing - leasehold or Fee Simple.
Or, you may prefer to lease the building or space with an Lease Option
which will allow you to
conserving your operating capital at the onset when you need liquidity the most until you are in a better
cash position later on to purchase the building. If so, you must create a very tight
Purchase or Lease Option at the onset - and be certain
to read my file disclosing the 17 Pitfalls you should read before signing
that lease.
Once your business is established; that is, profitable with meaningful
financials, the bankers and real estate
lenders will fall over each other to loan funds for your business expansion
and/or a building acquisition. However, you will never negotiate better terms and price
for the building, either as a Purchase or a Lessee, than when you are buying the
business, i.e., negotiating the deal at the onset, especially if the Seller/lessor is motivated for financial, health
or other reasons.
And once these pressing needs are resolved, your opportunity to negotiate a
"hot deal" for yourself will have vanished. You could even consider a SBA 10% d/p loan
– plus incorporate building improvements and equipment purchases into one loan.
Of course, it goes without saying that the terms of your Lease Option
Agreement must be very tight
to prevent
your Lessor/Seller from attempting to "wriggle out" of your Agreement when
the time arrives to exercise it; especially if the value of the structure has increased
thanks to your business success, creative efforts and/or inflation. Always "tie up" the Lease Option (or
Lease Purchase) terms of the building prior to closing of Escrow
because once you make your Landlord fat (fatter), dumb and happy with timely payments he
or she will most likely lose any desire to sell the building to you at a later
date. Instead, your reward for being a great tenant will be an escalation
in your lease cost.
Furthermore, you should always take video and /or snapshots of the interior and
exterior of the building before you take possession because when you later when you apply for a
refy, you can prove to the lenders all the improvements that you made - or show
the Landlord that the previous tenant caused all the damages that you as the
current or departing tenant are now being held responsible for.
If you have no choice but to lease the
building or space, then you must be very careful at the time you sign the Lease
that you do NOT sign away your life because whereas the large print will give you all the
rights and privileges of a Lessee, the small print jeopardizes your retirement,
home equity, college funds, sundry investments, and your future, etc., etc., should your
business fail, all possibilities that you must protect yourself from these blood thirsty, greedy,
vulture Landlords. You should also protect yourself from damages that
the departing tenant may possibly have left behind for you to clean up because your Landlord may hold you responsible
for these damages when it's
your turn to vacate. Lastly, when you sell your business that is leasing space
or a building, you must obtain a release of your Personal Guarantee of the
Lease......or you may live to rue the day that you did not do this. (See the
file in the Business Information Folder, "Lawsuits, interesting business
litigation to learn from.doc - and many files that will limit your personal
exposure).
Unfortunately, the unsuspecting, optimistic, trusting, starry eyed, happy entrepreneur
type person just may not have a clue of what he had signed; that is, until it is too
late - when the buzzards are flying overhead as the Sheriff has placed his
personal property, i.e., equipment, inventory, office stuff, etc., etc., out on the street
while simultaneously filing litigation against your home & other hard assets,
preferably real estate because it cannot be hidden in a garage. I have provided several illustrations of Landlords taking their X-tenants
to court for past rents (Read Lawsuits, interesting
business litigation to learn from - in the Business Information folder),
future rents and all the exorbitant legal costs of collecting this arrearage,
sums that will stun your mind and make your hair fall out. I also have
provided you with a few files just pertaining to Personal
Guarantees; horror stories that will prevent you from sleeping - only because I
want you to become an informed Purchaser/Lessee.
You should also take advantage of my selling hundreds of buildings during these
past 40 years; great experiences that I now offering to you for just a token price.
Just one clause in a well structured Purchase & Sale Agreement of Lease Option
could be your financial salvation. But you must first take the time to read
the Fortt Business Guide & Real Estate Tutorial by thoroughly reviewing the
Table of Contents - 80 pages of stated files. This will indeed give you an
overall perspective of what is being offered.
The small $75.00 cost of the Fortt Business Guide
(plus S/H) is about equivalent to taking your sweetheart to dinner at an OK
restaurant, or about the same cost as phoning your attorney for one
meaningful 15 minute incremental phone call with NO follow-up. Or you could pay
$35.00 - $100.00 for just one to two formats with a Legal Form Company. My
$75.00 fee is just "chicken feed" (I'm dating myself) in comparison to what you
have at stake in buying or selling a business and/or building. Just one idea
out of the 1,120 files could very well save your investment, either a cash down
payment
investment or your business equity. A good business friend of
mine who owns a brewpub (Every X- U.S. Navy man needs a buddy who owns a brew
pub) recently informed me that he paid
$400.00 for a 15 page Business Plan format for his then proposed brew pub that he had to completely revise to
suit his needs and another file that I have provided you, i.e., a Lease/Purchase
of a business, that my X client paid his attorney $75.00 for). Hence, my charge
for 1,120 files is indeed exceedingly attractive in
comparison.
Oh my God, talk about
outlandish professional fees.........I'm still in shock from an incident many years ago my ex-business attorney who I
had paid umpteen thousands of dollars to over the years for his services (he was good and
I bought to his office a zillion great clients) charged me
$85.00 for a 20 minute conversation that we had while sitting in the hot tub at the
local YMCA one evening . Upon receiving his billing I immediately returned
it to him with an attached sour note stating, "E., I've never complained about your excessive billings until now.
The next time you and I talk about girls and boats in the YMCA hot tub, please
tell me if your are charging me or not." My only regret is that I did
not save that original billing for it would now be hanging on office wall for
others to witness. I've seen attorneys charge $3,500 just to write up a
Purchase & Sale Agreement - that included some consultation as well.
The cost of the Fortt Business Guide & Real Estate Tutorial seems almost
trivial in comparison to the wealth of knowledge that you will be receiving;
ideas that could very well save you substantial sums of money regardless if you
are the Purchaser or Seller. Again, just one ok idea could "make or break"
your transaction and save you considerable grief after a closing..
Of course,
I have provided you with a 30 day guarantee to ensure your complete satisfaction. Just be fair
with
me.
Thank you for taking the time to allow me to share my thoughts with you…
CLICK HERE
To review the 1,120++ Word, Excel & Webpage files that are contained in the
Fortt Business Guide CD
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