Quality employees are essential for the long-term success and growth of any business. Many entrepreneurs learn this simple fact far too late. Regardless of what kind of business you own, a handful of key employees can either make or break you. Sadly, businesses have been destroyed by employees that don’t care, or even worse, are actually working to undermine the business that employs them. In short, the more you evaluate your employees, the better off you and your business will be.
Forbes’ article “Identifying Key Employees When Buying a Business”, from Richard Parker does a fine job in encouraging entrepreneurs to think more about how their employees impact their businesses and the importance of factoring in employees when considering the purchase of a business.
As Parker states, “One of the most important components when evaluating a business for sale is investigating its employees.” This statement does not only apply to buyers. Of course, with this fact in mind, sellers should take every step possible to build a great team long before a business is placed on the market.
There are many variables to consider when evaluating employees. It is critical, as Parker points out, to determine exactly how much of the work burden the owner of the business is shouldering. If an owner is trying to “do it all, all the time” then buyers must determine who can help shoulder some of the responsibility, as this is key for growth.
In Parker’s view, one of the first steps in the buyer’s due diligence process is to identify key employees. Parker strongly encourages buyers to determine how the business will fair if these employees were to leave or cross over to a competitor. Assessing if an employee is valuable involves more than simply evaluating an employee’s current benefit. Their future value and potential damage they could cause upon leaving are all factors that must be weighed. Wisely, Parker recommends having a test period where you can evaluate employees and the business before entering into a formal agreement.
It is key to never forget that your employees help you build your business. The importance of specific employees to any given business varies widely. But sellers should understand what employees are key and why. Additionally, sellers should be able to articulate how key employees can be replaced and even have a plan for doing so. Since, savvy buyers will understand the importance of key employees and evaluate them, it is essential that sellers are prepared to have their employees placed under the microscope along with the rest of their business.
Leases should never be overlooked when it comes to buying or selling a business. After all, where your business is located and how long you can stay at that location plays a key role in the overall health of your business. It is easy to get lost with “larger” issues when buying or selling a business. But in terms of stability, few factors rank as high as that of a lease. Let’s explore some of the key facts you’ll want to keep in mind where leases are concerned.
The Different Kinds of Leases
In general, there are three different kinds of leases: sub-lease, new lease and the assignment of the lease. These leases clearly differ from one another, and each will impact a business in different ways.
A sub-lease is a lease within a lease. If you have a sub-lease then another party holds the original lease. It is very important to remember that in this situation the seller is the landlord. In general, sub-leasing will require that permission is granted by the original landlord. With a new lease, a lease has expired and the buyer must obtain a new lease from the landlord. Buyers will want to be certain that they have a lease in place before buying a new business otherwise they may have to relocate the business if the landlord refuses to offer a new lease.
The third lease option is the assignment of lease. Assignment of lease is the most common type of lease when it comes to selling a business. Under the assignment of lease, the buyer is granted the use of the location where the business is currently operating. In short, the seller assigns to the buyer the rights of the lease. It is important to note that the seller does not act as the landlord in this situation.
Understand All Lease Issues to Avoid Surprises
Early on in the buying process, buyers should work to understand all aspects of a business’s lease. No one wants an unwelcomed surprise when buying a business, for example, discovering that a business must be relocated due to lease issues.
Summed up, don’t ignore the critical importance of a business’s leasing situation. Whether you are buying or selling a business, it is in your best interest to clearly understand your lease situation. Buyers want stable leases with clearly defined rules and so do sellers, as sellers can use a stable leasing agreement as a strong sales tool.