Update on the buyout of my business.

[ittrainers]

A month ago I posted about how I sold my 18 month old business for over 100k but the buyer stopped making payments.

Update.

We gave him a 30 day demand letter and he didn’t respond. We are serving him papers and he has 21 days to respond or it goes to default judgement.

I found out via an instagram post that this guy has engaged in fraudulent behavior with other business. I talked to the owner of that business and we discussed teaming up legally to go after him.

I’m confident I’ll get a judgement against him, but it is unlikely I’ll get paid. I spoke with the landlord today and he also hasn’t been paid. I’ll probably end up with my business back, and hopefully overtime we can squeeze this guy for money.

I’ll attach some other links of past frauds he did under a different name.

Post 1

Post 2

 

[phylum50]

@ittrainers Hopefully you can get your win in court. It sounds like a really shitty situation.

When my family sold their business they put a clause in the sales contract that said if the new owner fails to make payments then the business ownership defaults back to the original owners. Basically the same as a bank repossessing a car when payments aren't made.

They sold the real estate and business separately as they were under different entities to the new owner and both agreements had the same clause. They also had the new owner sign a quitclaim deed that stayed with the lawyer. So as soon as they defaulted on payments it would be possible to go file the quitclaim deed with the court and get the property back.

This might be something to think about for your next business sale.

 

[menakaesa]

@phylum50

put a clause in the sales contract that said if the new owner fails to make payments then the business ownership defaults back to the original owners.

Yeah, a good rule to follow, but you would still need to go to court and get a legal judgement.

 

[khaellis]

@phylum50 But sometimes scammers then file bankruptcy and bleed more money from the biz and drag things out through the court... been there.

 

[flyingforjesus]

@ittrainers I don’t think I’d sell unless it’s fully paid upon purchase. They can go get a loan or mortgage their house, whatever. But I’m not being a bank for a buyer.

 

[angelgirl77]

@flyingforjesus Exactly this.

 

[massappeal]

@flyingforjesus Then you would never sell, only 20% of business are sold in USA, rest of them fold.

It needs to be co-operative transaction. From buyer perspective, why should he assume a huge recourse loan on all his assets buying a business that all the numbers might have been inflated/bullshit/made up and frankly no amount of due diligence would eliminate this possibility . Things go wrong, he would lose everything.

 

[flyingforjesus]

@massappeal I concur. Which is why I’d never buy one! I’m just saying that for my company, if someone wanted to buy it, I want full payment. Just like my house - I had so many people ask if I’d hold the mortgage- no way.

 

[massappeal]

@flyingforjesus Then you would not get any value from your business, you want to retire someday, don't you?

It's not like a house, value of the house is physical asset, value of business is mainly based on past performances. It shouldn't be completely cash upfront but if buyer and seller co-operate, it should be a combination of cash, SBA loan, seller financing, etc.

The transaction is a risk and everyone is involved, I think 30% seller financing tied to performance is reasonable. This way, seller also share the risk. Selling it for some money is much better than just letting it fold in my opinion. You just have to consider that 30% a performance bonus based on how much you can correctly judge the character of the buyer.

 

[flyingforjesus]

@massappeal I don’t disagree with your logic, but I still wouldn’t do it. Take franchises for example, dyk how much $ you have to have in assets and cash to buy in? Millions. This vets buyers to ensure they can withstand the time it takes to turn a profit.

I don’t need to sell my business to retire; I’ve been planning for retirement since the day I started working! When I decide to retire, maybe I’ll transition and downsize, or sell or just close up shop, who knows

I guess what I’m saying is, for me, the risk isn’t worth it. The juice ain’t worth the squeeze!