Good morning,
For prospective buyers, Florida's dynamic market presents a wealth of opportunity. But a successful acquisition requires more than just finding a good business; it requires rigorous due diligence to avoid costly mistakes.
After securing financing—most commonly through an SBA 7(a) loan—the due diligence process begins. This is your chance to verify everything the seller has represented. While you'll review financials, contracts, and operations, there is one Florida-specific trap that buyers fall into time and again.
The Critical Mistake: Relying on the Seller's Insurance Costs.
This is arguably the most dangerous assumption a buyer can make in our state. A buyer's financial model and ability to repay their loan are based on the seller's historical Profit & Loss statements. However, in Florida's volatile insurance market, commercial property and liability premiums can increase dramatically—sometimes by 50% or more—upon policy renewal or transfer of ownership.
The seller's current insurance premium is not a reliable indicator of your future cost.
The Solution: A mandatory step in your due diligence must be to obtain your own independent, binding insurance quotes for the business under your ownership. You must use that future cost, not the seller's historical cost, in all of your valuation and cash flow models. Ignoring this step can turn a profitable-looking acquisition into a financial disaster overnight.
The Takeaway: Due diligence is your shield. Be thorough, be skeptical, and pay special attention to the unique risks of the Florida market.
Tomorrow, in our final installment, we’ll cover the new Florida laws from the 2025 legislative session that are changing the rules of the game for business owners.
Acquiring a business is one of the most significant investments you'll ever make. As a licensed Florida business broker, I guide buyers through every step of the process, from identifying opportunities to navigating the complexities of due diligence. Let me help you make your acquisition a secure and successful one.
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Need a roadmap? Reply in the comments section or send us an email for assistance. 360 Perspective Partners offers Professional Licensed Business, Commercial and Investment Brokerage Services along with providing Professional Licensed Community Management Services in Central Florida: https://my360perspective.com/
Contact me directly at [email protected]. To see our other useful Newsletters on this topic and others: https://realestate-business-broker-guru.beehiiv.com/
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