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Generally speaking, relationships are easier to develop and maintain when you work with the other person. The same is true in business, especially when you’re considering the relationship between a business owner and an advisor. I had a chance to be a guest on an episode of unsuitable on Rea Radio with Kirk Spillman, president and CEO of Eagle Machinery, a manufacturing company located in Sugarcreek, Ohio, to talk about what goes into developing a strong business advisory relationship – particularly when buying a business. Bottom line, a successful relationship with your advisor goes far beyond any monetary transaction; it’s rooted in mutual trust and respect. And, if nurtured, a relationship with your advisor can last a lifetime and can help drive long-term business success.
Listen to episode 34: the best way to buy a business, build a relationship that matters, on unsuitable on Rea Radio, Rea & Associates’ financial services and business advisory podcast.
How Well Do They Know Business & Can You Trust Them?
Before you decide who you should work with from an advisory perspective, you need to consider what kind of assistance you’re looking for. Remember that while it’s not always necessary for your advisor to have expertise specific to your industry (although that is undoubtedly helpful), it is critical for your advisor to be a business expert who can effortlessly apply general business tactics, strategies and best practices to address your specific needs and drive results. Don’t miss out on an opportunity to work with the best advisor in the market simply because they don’t market themselves as an expert in construction or healthcare. Call them up and get to know them before making a decision. Your choice should ultimately hinge on the advisor’s business prowess and out-of-the-box thinking.
When You Don’t Know, Ask An Advisor
We hear a lot about the importance of bringing an advisor on to assist with succession, but there are important considerations an advisor should be privy to when buying a business as well. Over the course of my career, I’ve learned that a person looking to buy a business needs just as much help, if not more, than the tenured business owner seeking to embark on retirement.
Those who are new to business ownership are trying to overcome a variety of obstacles, not to mention the difficulty associated with managing a smaller budget. And while it may not seem to make much sense to “splurge” on advice from a professional business consultant when there are other bills to be paid, the best way to navigate this unknown territory is to turn to a trusted advisor who has seen the situation you are facing.
“I learned very quickly how much I did not know about business,” said Kirk, during the podcast. “I thought I knew enough about operations and customer service and marketing all of those things that I could just step into this business and be very successful. [Before long] I recognized that there were going to be things that I would need that I didn’t have experience or resources for … [like] the entity itself. How do we set this entity up? I knew nothing about that.”
Your business advisor will be able to shine light on the areas you know nothing about, such as how to structure your business entity, how to determine the true value of the business, setting up payroll, managing inventory, etc. There’s a lot of risk involved in buying a business because, particularly for owners who are new to entrepreneurship, there are so many unknowns. Your team of advisors will help take the guess work out of business ownership.
I invite you to learn a little bit more about Kirk’s experience and to learn how a business advisor can help you establish, manage and grow your business until you decide it’s time for you to move on. Click on the media player below or visit www.reacpa.com/podcast to learn more about the best way to buy a business.
By Ryan Dumermuth, CPA, CFP (Mentor office)
Want to learn more tips to help you succeed in business, check out the following articles for additional insight.
There are many reasons why you may want to move your business to a new location, but if you want to be sure the location you choose is not only equipped to meet your needs, that the price is reasonable and that the location is ideal, consider bringing in your business advisory team for guidance.
When it comes to determining your business’s overall financial wellness, look no further than your financial advisor. These professionals are experts when it comes to helping you determine an accurate cash flow projection, make sense of any tax implications associated with the move and will help you determine if, based on your current size and projected growth, that space you are eyeing makes since. But your financial advisor can really only help you see a part of the picture. I recommend bringing adding a real estate expert to your business advisory team when major relocation decisions are the topic of conversation.
A common mistake some business owners make is to believe they can coordinate the office relocation themselves. And while it may be possible to manage your daily responsibilities, make decisions about the future of your business and property real estate negotiations, you may wind up doing more harm than good because you aren’t giving any of your responsibilities the proper attention needed to succeed. A real estate broker will not only manage the legwork associated with choosing your business’s new location, they will make sure you get exactly what you are paying for while negotiating a deal that builds out time for you to establish yourself at your new address.
I recently spoke with Justin Fodor, a real estate broker with Carr Healthcare Realty, a brokerage firm that works exclusively with professionals in the healthcare industry, about other reasons why a business owner – regardless of industry – should consider working with a real estate expert.
Get Your Money’s Worth
When it comes to understanding the art of negotiation, a real estate broker has the knowledge and experience needed to help you lock in a great deal at favorable terms – regardless of whether you are planning to buy or rent your new property. Oftentimes during this process, the business owner may be a apprehensive about being too forceful during the negotiation process. Justin says this is a great scenario of when a real estate broker would come in handy because they have the knowledge needed to go into the meeting with the confidence of knowing that the “sticker price” is only the starting price.
And if you are worried about sending in a broker to negotiate on your behalf, don’t be.
“Landlords work with brokers all the time,” explained Justin. “In fact, they hire their own brokers. They expect you to bring one to the table as well.”
Location, Location, Location
According to Justin, if a real estate brokerage firm doesn’t specialize in demographics itself, they will work with professionals who do to make sure their clients are getting the ideal location for their business. Whether you want to find out how many similar businesses are in a certain area or whether the local business climate is right for your business to be successful, demographic information helps optimize your office’s geography.
“We can help [our clients] decide the type of environment that’s right for them by taking into consideration foot traffic, visibility, population, and other demographics,” said Justin.
Take The Time You Need
Perhaps one of the best reasons to work with a real estate broker – especially one who specializes in your specific industry, is because they know how to negotiate for terms that matter most to you.
Justin explained that when he works with dental professionals, for example, he always asks for the time needed to move into the space, install equipment, remodel the office and reestablish their client business.
A broker, especially if they specialize in serving businesses like yours, can help you negotiate the time you need to stabilize your business’s cash flow. In fact, Justin said it’s not uncommon to secure a 5-month build-out period and 3-4 months of rent-free office space, which gives you enough time to get your business up and running again.
Are you considering an office relocation or a major warehouse move, email Rea & Associates to learn more about establishing a strong business advisory team.
By Ryan Dumermuth, CPA, CFP (Mentor office)
Are you looking for more ways to facilitate business growth? These articles should help:
4 Tips for Managing Sudden Wealth
Congratulations – you just won the lottery! Or, in a more realistic scenario, a significant amount of money has landed in your lap through an inheritance or the sale of property.
As many who have been in your shoes will attest, it’s important to pause, take a step back, and evaluate your options before making any big financial decisions. Sure, that brand new sports car would look
great in your driveway, but will you regret spending the money down the road? Significant money creates many opportunities. Some? Wonderful. Others? Money pits.
Before you make a move with your money, think it through and talk to a pro. The truth is, there’s no right answer, as no two financial situations are exactly alike. But these four steps will help you decide what’s best for you.
- SLOW DOWN. It’s easy to get caught up in the excitement of new wealth, and the tailspin that can ensue. But don’t allow yourself to lose your footing and don’t be tempted to make excuses for reckless spending. Avoid making any significant or impulsive purchases for at least a month or two. Take a step back from the moment and think long-term … what sort of financial goals do you have for the future? How do you really want to spend this money? Begin thinking about this and write down your thoughts. Writing down goals and thoughts is a proven method of helping you achieve your goals. It’s also helpful to have these things in writing when you meet with your advisors.
- FAIL FORWARD. Think about some of your past financial blunders. We’ve all made mistakes – but they’re only truly mistakes if you don’t learn something and prevent them from happening again. You know yourself better than anyone, and you owe yourself this honest examination. Use your missteps to your advantage.
- DO YOUR HOMEWORK. If your decisions affect others, talk with them before acting. If someone has an investment idea, consider whether it’s too good to be true. If you are approached to help a charitable cause, ask yourself if it’s something you’re passionate about. And make sure you have an understanding of the organization. You should also find out if they will publicize your contribution.
- CONSULT WITH A PRO. Navigating new wealth is complicated, and it’s imperative you find experts to help guide you through the process. Talk with a few people you trust and respect. If an advisor’s name is mentioned more than once, it’s probably someone you should talk to. If you already have an advisor, consider whether or not they are up to the task at hand. You’ll want to work with a CPA, attorney and investment advisor. Be prepared to invest some time meeting with each advisor in an effort to decide who to hire. Each one will play a different, but valuable role. Depending on your situation, you could lose a chunk of your newfound wealth to income taxes, so be sure to talk to a CPA with a specialty in income tax. You will want to know what you owe and when you owe it. More importantly, you’ll want to learn if you can avoid, reduce or defer any of the tax.
Finally, before selecting the advisors you want to work with be sure you understand all of the fees involved with their services up-front. Be prepared to get what you pay for.
Whatever the reason for your windfall, make sure you take the time to respect it – and your financial future. Email Rea & Associates to learn more about managing sudden wealth.