When the economy got weak and entered into a recession,
small businesses lose Value in their businesses as sales declines and profits
turns into losses, cash flow turns negative and businesses close down quickly
as they could not obtain further financing from banks or private lenders.
So in desperation, most small businesses try to quickly sell
their business for some Perceived Value, marketing their current losses as
temporary and hyping their goodwill and other intangible highlights such as
product superiority, location advantage or other competitive advantages.
In most cases, they failed to sell their business for the
price they want or for any value( who would want to buy a cash flow loss
business?) and were forced to shut down their businesses, usually defaulting on
their store or office lease, which force them to turn over the property back to the landlord.
And usually the empty space location stays on the market for six months or
longer, sometimes over a year, depending if renovations or new construction is
necessary, new business opening & marketing time lag etc etc. All these waiting and time loss during the
turnover creates substantial loss not just for all parties involved but on the
local economy based on the gdp multiplier effect.
So whats is the solution?
The New Business Swap Option Exchange, established over the
web could remedy this situation so that the lag time is close to zero on the
turnover and spur an local entrepreneur boom!
The purpose of this exchange will eradicate turnover time
between the old owner to the new owner, all construction or renovation time,
minimize any legal structuring time
lag, so that the transition is smooth with zero lag and effect to the economy.
Not only that, it creates a win win situation for new
budding entrepreneurs to try new businesses on the cheap and give the old
owners a chance to sell their business at a price they wanted. And the landlord doesn’t suffer any loss of
rent as transition is smooth and immediate.
So whats the magic?
And whats this swap option?
Lets use an example for best clarification.
An Italian restaurant owner owns a restaurant for years;
having spent 300K on renovations, have a 5 yr remaining lease of 10K per
mth. It used to make a profit of 100K
per yr and the business is valued at 200K ( two time income) if sold.
A recession hits. It
now has losses of 20K a yr. But the
owner feels that the recession is short lived and once over, his business will
be making 100K per yr again.
However, he has to feed his family and could not sustain the
losses each mth. No banks or lenders would lend him any money.
So he has 2 options. Insist on selling it quickly for the 200K valuation for his business when
economy turns good OR for any value
anyone would pay NOW since it has
losses.
The most important value of the restaurant is the 300K infrastructure(like the kitchen
and equipment, air ventilation etc) he already invested for the restaurant yrs
ago. So for someone taking over the
restaurant, that 300K represents good value to start a restaurant if he can buy
it for less than 300K.
Or he could close
down the business quickly to avoid further losses and hopefully the landlord
will forgive him on the remainder of his lease(some would, most has a clause
that says landlord needs to be warned some mths ahead of time).
In the most likely scenario, he will shut down the business
because no one wants to buy a business of proven losses at a price tag of 200K
or any price tag
With the Swap Option exchange over the web, the scenario
greatly improved.
Here is how it works:
The owner list his business for sale at 200K on the web with
An Option.
Anyone interested will contact him and propose a deal, along
that Option.
As an eg, The option is an agreement that basically says the
new buyer will pay 20K (10% or any
%)) for half the business now(or any
%),
puts up all the operating capital for ALL monthly expenses
and potential business losses for 6 mths forward(or any time frame),
runs the business
for 6mths or longer(or any time frame)with the first 180K of net profits after
all costs going to the seller to fulfill his 200K price tag.
After getting the first 180K profit, the seller could remain
partners or transfer full ownership to the buyer.
The buyer has the Option to terminate the relationship after
6 mths, especially if business remains at losses. Or renew the Option for another 6 mths. OR buy out the sellers
50% if all things goes profitable. OR keep renewing the Option till seller gets
his 180Kin profit to fulfill his price tag.
This Option is a Triple win win win situation for all parties.
The landlord obviously wins since he doesn’t care who pays
the rent, with the lease currently still in sellers agreement. So the new buyer
will probably sublease from the seller with landlords consent. The landlord
suffers no loss in time or rent roll and doesn’t have to worry about finding
new tenant.
The Seller wins since he is now not forced to close down his
business but instead earns a immediate 20K (10% or any X percentage of his
business valuation of 200K)
and has an
opportunity to wait and see if he gets his remaining 90% or 180K price tag over
time.
He takes no risk since the buyer will take over the sublease
going forward for 6 mths and absorb all losses, if any, going fwd. The
seller could even structure himself as
a partner in the new profitable business going forward after getting his full
price tag. What a bonanza! Compared this to just shutting down with his tail
between his legs.
The buyer also wins big, especially if he could not afford
the 200K price tag.
The buyer wins because with just 20 K, he took over a
business and he saves time on looking
for space, saving some 300K on new renovations, and legal lag time and
costs. With just 20K, plus rental and
operating capital for 6 mths, he gets to try his business idea on the cheap
since he gets to terminate the agreement after 6 mths if it fails. Once he terminates, the lease reverts back
to the old owner and he walks away clean and fast, only with the operating
losses if any.
This exchange could be set up easily on the web, partnered
with business-for-sale site like www.bizquest.com,
with high number of
bidders and sellers. And it should be organized in different industries since
this OPTION favors businesses in the same industry to save on the
construction/renovation startup cost focus.
How many times have we seen businesses squandering away
their startup cost in renovation and construction once an unrelated industry
business took over a space.
When done right, this New business Option saves time,
eliminates lag and opportunity cost in a bad economy and promotes
entrepreneurship on the cheap and could help spur an entrepreneur boom!
=====================================================================
end of blog
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Blog Index:
On TImeline of Idu
Timeline, History, and whats new - idu
On Education-
Educating Morals and Ethics is about Simplicity -Yes! Michael Jordan can truly fly!
http://iduidu.blogspot.com/2012/10/is-sales-and-marketing-ultimate-savior.html
Is Sales and Marketing the Ultimate Savior to our Education System?!!
the Ultimate Ethics & Moral Education - Improv Theatre !??
Teaching Success and Good Morals in 60 days?! The age of Simplicity ......bringing back that lemonade stand
Teaching Success and Good Morals in 60 days?!- Part 2
Speed Reading and Speed Writing with superman, w/ anti-Kryptonite lasers
Simplicity Wins in Education - the single most powerful Word to teach success and good morals?!
The single Superhero Skill one could ever have... Even Superman cant beat this
Paying Students to attend school ?!
LifeSkills for Success- only for the privileged?!
http://iduidu.blogspot.com/2016/03/the-problem-on-affiliation-hereditary.html
The Problem on Affiliation - The Hereditary, Impossible Hurdle to a Perfect Moral Society?
The Problem on Affiliation - The Hereditary, Impossible Hurdle to a Perfect Moral Society?
On Future of Work, Perfect Team Chemistry, & “the Enabler” to solve ALL Problems
http://idu1.blogspot.com/2015/12/ending-era-of-failures-why-good-ideas.html
Ending the era of Failures- why good ideas fail....the Perfect Team at a single click of a button- the non Star Trek approach
http://idu1.blogspot.com/2015/12/ending-era-of-failures-why-good-ideas_31.html
Ending the era of Failures- why good ideas fail....the Perfect Team at a single click of a button- PART 2
Future of Work = Aligning one's Passion and Life Purpose with Work
http://idu1.blogspot.com/2015/12/future-of-work-aligning-ones-passion_31.html
Future of Work = Aligning one's Passion and Life Purpose with Work - Part 2
How we got it all wrong in Gamification - the only One Variation that works
Finally, The Enabler to solve all social problems
On Charity and Non Profit Leadership-
Why Charities are getting it all wrong! Matching Passion to Charity
Revamping the Charity System with Passion Inc- is having maximum FUN the ultimate Savior to all Social Problems?!! Part II –Why Charities are getting it all wrong!
Matching Passion to Charity - Part 4- Finally, web platforms that combo "Passion, Cause, Skills" to solve all problems
Non Profit Leadership - Ambitious the totally Unambitious ?!!! You cant be serious.....
Non Profit Leadership - Ambitious the Unambitious PART B
the Super Lazy is truly Super! Charity the Lazy way
On Solving Hunger-
Super Serious Solution in ending world hunger - Yes Seriously Serious
On Solving Homelessness-
This is the article to end the word ”homelessness”?!!
The Math of Ending Homelessness - the undiscovered Marketer Testimony -PART 2
On Saving Animals-
SOLVING the Animal Shelter Problem
http://iduidu.blogspot.com/2013/10/solving-animal-shelter-problem-part-2.html
Solving the Animal Shelter Problem-Part 2-Super Scrabily Scooby !
Solving the Animal Shelter Problem-Part 3. Single Best Idea- Cafe all Sanctuaries into Magical Kingdoms!
On Solving Traffic issues-
http://idu1.blogspot.com/2015/09/catch-that-cyclist-it-could-save-your.html
Catch that Stormtrooper-Catch that Cyclist! It could save your life
Is 25 miles per hr really enough for ZERO VISION - the Irony here.....
Driving 20 Miles Per hr Speed Limit (not 30!!)in Suburbs to Save Lives!??!
Solving Traffic Gridlocks without a penny
Solving Traffic Problems
On Economy-
How to REVIVE the local small business economy in a recession and start a entrepreneur boom!The Triple win win win approach! The -new business SWAP OPTION-strategy
On Healthcare and Optimal Physical Performance-
Knowing the Yin and Yang of your food is more than just watching kung fu Panda -it could save your life?
Music - Boost Your brain Power without any Effort or a Penny
The needed Multi-Vitamin pill for Students to Succeed
Lose Weight Without a Sweat or a penny!
Ear Candling - Awesome Health Benefits
On Happiness and Purpose-
IDU "6 Steps to Happiness" QUICK SUMMARY - 5 seconds to instant bliss…..but even 5 seconds is too long for a superhero!
http://iduidu.blogspot.com/2012/03/idu-6-steps-to-happiness-part-1.html
Idu "6 steps to happiness" ==part 1
idu "6 steps to happiness" ==part 2
idu 爱嘟! HAPPY秘笈 - 幸福 秘诀 part 1
idu 爱嘟! HAPPY秘笈 - 幸福 秘诀 part 2
du 爱嘟! HAPPY秘笈 - 幸福 秘诀 part 3
http://iduidu.blogspot.com/2012/09/idu-happy-part-3.html
idu 爱嘟! HAPPY秘笈 - 幸福 秘诀 part 4
http://iduidu.blogspot.com/2012/09/idu-happy-part-4.html
idu 爱嘟! HAPPY秘笈 - 幸福 秘诀 part 5 final part
here is the smallest blog in human history for the biggest task of "Making History" - Nonprofit Leadership
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