First of all, I would use some common sense. If he`s offering to sell his business to any random customer that walks through the door, be skeptical...very skeptical. "Hey! If you buy this mattress, I`ll throw in the whole damn store!" Even though it sounds like a good deal, it`s probably not. However, if he owns three stores and a couple of buildings, he probably doing something write.
The reason I say be skeptical, is because most business owners use business brokers to sell their businesses. It`s usually the best way to get the best possible price. This is because brokers contact many potential investors and try to get a bidding war started. So when people avoid this process, it`s make the hair on the back of my neck stand up.
Because he`s offering to sell you this business in a 1.5 years, seriously take advantage of this. Seriously!
You should do something along these lines.
First: Hire an accountant to help you go over the books, you need to do this anyways. Then wait for the economy to get worse, in another six months it will be worse...and by then he`ll be sweating balls. Then, when the economy is real bad, and he can`t take it anymore, make an offer. However, make this offer through an "Option" of some kind.
Second: In order to structure this "Option," hire a lawyer. What this means is, six months from now, you`ll make an offer to buy the company in 12 months. Lets say you offer to buy it for $300,000. This "Option" will allow you to, in 12 months, walk away from the deal if the economy is even worse and you don`t want to go through with it. However, if the economy is better, you can exercise your "Option" to purchase the company for $300,000 even though it`s now valued at $500,000 due to the better conditions. And, make sure this "Option" gives you the right to purchase it at that price so he can`t turn around and sell it to someone else. Like I said, hire a lawyer.
He will be open minded to this "Option" idea because, in six months, when the economy is tanking worse than imagined, he will be more than happy to lock in any price.
This is how you take advantage of peop...er umm...of this situation.
With that being said, these "Options" aren`t free. You`ll probably have to pay him $20,000 for it and you will not get it back if you walk away from the deal. It gives you the right to buy and you need to purchase, and risk, that right to buy. It`s a gamble, but that`s what makes it fun.
That`s it for now.
nahtan11/21/2008 7:02 PM