Like me, my cousin Kevin is a business lawyer. He lives in medium-sized town in New Jersey. For many years, he’s been getting his haircuts from a barber in his town whom I’ll call Joe. For 20 years, Joe has been running a sole proprietorship called Joe’s Barbershop. He rents his shop. Joe recently told Kevin that he won’t be available to cut his hair anymore because he’s shutting his shop down and retiring. Kevin told Joe to not just shut his shop but first to try to sell it. Joe answered that he’d never thought of doing that, but he said his business only nets him $50,000 a year, for very hard work. Who would want to buy it?
Kevin told Joe, “That’s an easy question. Your business name is well known in town; you’ve got a completely equipped shop; you’ve got a great bunch of regular customers; your landlord would almost certainly be willing to transfer your lease to your buyer; and your buyer will be buying a substantial stream of future earnings — maybe $50,000 a year — for many years. And everybody reads our town newspaper. So you could easily and cheaply advertise the sale of your business to lots of prospective buyers. I bet if you advertise it, you can make $100,000.” Joe was skeptical, but he gave the sale a try. He didn’t get $100,000; but he did get $50,000. It was a hand-shake deal for an uncertified check. But the check didn’t bounce, and Joe got a chunk of cash he’d never otherwise have gotten.
Kevin told Joe he wanted a 10% commission. But of course he was only kidding (you’ve got to know my cousin); and in suggesting to Joe that he could sell his business instead of just shutting it down, Kevin did Joe a great service.
The lesson here is obvious. There are probably lots of small businesses — perhaps better described as micro-businesses (to use Kevin’s term) — not just in Kevin’s town but in every city and town, including many dozens or even hundreds in the general Concord area; the owners of all of these businesses will eventually have to retire; but when they do, they shouldn’t just shut them down; they should try to sell them.
One more thing that Kevin didn’t mention to Joe: When Joe sold his business, he should have used a written business purchase agreement. Even a one- or two-pager would have sufficed. And the agreement should have provided for a certified check. A good business lawyer would only have charged Joe a few hundred dollars to draft the agreement, and the agreement could have saved Joe big trouble.
Do you own a micro-business? When you retire, don’t just shut it down; first try to sell it. You might make $50,000. (No charge for this advice.)
John Cunningham is a lawyer licensed to practice law in New Hampshire and Massachusetts. He is of counsel to the law firm of McLane Middleton, P.A. Contact him at 856-7172 or lawjmc@comcast.net. His website is llc199a.com. For access to all of his Law in the Marketplace columns, visit concordmonitor.com.