How Much Do You Know About Your Commercial Lease?

17It may be your dream to own your entire business right down to the land where it sits, but if you’re like most business owners, you are currently leasing your business space. When was the last time you looked at your lease and brushed up on its details?

Don’t underestimate the importance of knowing your commercial lease. Sometimes, the information hidden in the fine print can make or break your business! Here’s what you need to know.

Lease Terms

Lease terms have caused countless business sales to fail. It is possible that your existing building lease contains clauses that can complicate the terms of your sale or make it impossible altogether.

Assignment and Subletting

The authority to assign and sublet a restaurant is often restricted to the landlord. You should expect to seek your landlord’s approval before initiating negotiations, though some leases do contain the term “permitted transfer” to allow for sales without landlord consent.

Renewal Options and Periods

Most restaurant leases require business owners to renew a lease no more than 180 days prior to the termination of the current lease term. This puts you into a position of having to exercise your renewal option in a relatively short period of time, which then puts you at risk of getting locked into battle with your landlord over a lapsed lease and lost option rates. (more…)

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3 Essential Things to Know Before You Sell Your Restaurant

sellingadviceSelling your restaurant is no easy feat. It isn’t something to jump into without the right support and preparation. Make sure you understand the essentials of restaurant sales before you get the For Sale signs ready.

Research Price Valuation

The wrong price can destroy your chances of selling your restaurant. Potential buyers may use one of a few different methods to determine the price they’re willing to pay for your business.

Assets in Place Method of Valuation

If your business is not making money, or it is marginally profitable, you will most likely pursue an Assets in Place purchase. Your buyer will pursue the fixtures, equipment, lease, and licenses that go with your business. In an Assets in Place purchase, your buyer most likely has his own menu and concept in mind, so he is not interested in the name or menu of your existing restaurant.

Going Concern Method of Valuation

A Going Concern method of evaluation indicates that your business is making money and the buyer has an interest in maintaining your business model, including the name, menu, operating systems, and personnel. With this method, the lease, leasehold improvements, fixtures, equipment, name, menu, concept, goodwill, and cash flow are included as part of the sale. (more…)

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I Have No Books or Records, Can I Still Sell My Business?

If you own a successful business and feel ready to sell your company and move onto your next big adventure, there are many factors you need to consider. Your prospective buyers want to see clear, objective facts that they can evaluate to determine whether your business will be a profitable investment.

Even if potential buyers are attracted to your business for other unique and personal reasons, a sale won’t stick without promise of a strong bottom line. You need to provide all sellers with comprehensive and organized financial documentation. If your business does not have books or records, you must create them before any sale can occur.

Prepare Your Financials Before Listing Your Business For Sale

The only way to create an accurate assessment of your business is to prepare two to three years of business records. It’s best to build these records over time, but it’s not uncommon for business owners to become so consumed with running their business that they let documentation take a back seat. If you find yourself in this position, you have no choice but to gather your papers, roll up your sleeves, and do it all now.

It may not be fun to devote days, weeks, or even months to the preparation of your financial records, but it will pay off! If you can provide prospective buyers with clear, comprehensive financial records that demonstrate the integrity of your business, you have a much better chance of receiving your asking price – or higher! (more…)

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I Am Behind On My Rent, Can You Still Sell My Business?

Selling your business is a serious decision, one that requires careful preparation. If you lease your business space and are currently behind on your rent, you may worry whether you can sell your business at all. Here’s what you need to know to tackle this obstacle and still achieve your goal of selling your business.

How Much Do You Know About Your Business Lease?

Your business lease is much more than the amount of rent you pay to your landlord each month. Your lease has the potential to make or break the sale of your business. Since you don’t own the commercial building associated with your business, any effort to sell your business will require you to create a lease assignment, which transfers your association with your commercial lease over to the buyer. This allows the buyer to take over all obligations attached to your lease.

Approach Your Landlord If You’re Behind on Rent

Keeping up with bills can be challenging if your small business is struggling. For most businesses, rent is the largest monthly expense, which means it’s also the first to fall behind. Though laws vary by state and the terms of your lease, your landlord does have the ability to remove your business from its location and terminate your lease, giving you only a short amount of time to remove all assets from the property and vacate.

If you have a positive working relationship with your landlord, it might be possible to negotiate an agreement to catch up on your rent. An agreement could prevent notices that lead to the eviction process, thereby preserving your good standing as a tenant and making it possible for you to sell your business. (more…)

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