Interview with Louie Sopov of Prouse, Dash & Crouch LLP

Episode 10 of the Mad Profit Podcast we speak with Louie Sopov, a corporate commercial lawyer with over 15 years experience of M&A and commercial business helps explain to us what to expect when purchasing a business.

His provides great insight on topics such as cross border jurisdiction, due diligence, contract structure and finding the right legal partner when buying or starting a business.


INTRO: Welcome to the Mad Profit Podcast, where we interview active investors, entrepreneurs and experts, who left corporate jobs to buy or start successful ventures and live life on their own terms. Listen to their stories, learn from their experiences and heed their advice, so you too can create mad profits and the life you’ve always wanted and now here’s your Host Laurent true.
LAURENT TRUC: Welcome back this is Laurent true from the mad profit podcast. Thank you for joining everybody today we have a very special guest with us. I’ve been getting a lot of questions lately from entrepreneurs about how do I start a company? What should the corporate structure look like? So today we’re doing something a little bit different. Instead of having an entrepreneur, we decided to have a corporate commercial lawyer on with us. So, Louie thank you very much for joining, welcome to the mad profit podcast.
LOUIE SOPOV: Thank you so much Laurent, it’s a real pleasure to be with you today.
LAURENT TRUC: Well, thanks for taking the time. So, Louie I don’t want to put words in your mouth, so I think the easiest thing to do is to have you tell us a little bit about yourself and what you do. So, if you don’t mind can you give us a bit of history.
LOUIE SOPOV: Absolutely! I’ve been practicing law for the last 20 years, the last 15 of those 20 have been exclusively in the corporate commercial area. I’m with a small to mid-size firm out here in Brampton and a lot of our business is small to mid-size, ranging in types of industry. We do a large gamut of things, everything from mergers acquisitions to corporate structuring, tax planning, commercial leasing. If you will sort of the jack-of-all-trades within a particular expertise, but that’s the core of what I do and what I’ve been doing for the last 15 years. Excellence! This is gonna be good, then a lot of knowledge.
LAURENT TRUC: Perfect! So, a lot of what I’ve been doing is talking to people about acquiring businesses as much as starting businesses from scratch. You’ve done a lot of M&A and business acquisition. Just to kind of start us off, can you walk us through the general steps that somebody would take? So, if they find a business that they like and they want to go through an acquisition process, I assume it’s different whether it’s a small business versus a larger one, but are there kind of always the same general steps? Like what does that process look like?
LOUIE SOPOV: As a general rule the only difference between small, large transactions, the number of zeros attached to the price tag. Okay generally speaking what we’re always worried about and everybody’s heard this phrase before “Caveat Emptor” its “Buyer Beware”. So effectively where you would normally go out and buy a vehicle and it comes with a warranty and guarantee package about a foot thick and if something goes boom someone magically fixes it.
What the average buyer is going to be concerned about is what they don’t know. I think the biggest problem for most entrepreneurs when they’re thinking about starting a new business is they have an idea of where their expertise area is, so they focus in on an industry and then they try to look at the surface issues which is part of it, but before you even think about those sorts of things it’s really prudent to sit down with an accountant and a lawyer and to discuss first of all how do we structure this.
So, for instance is this the type of business where I should be incorporated for the purpose of mine? Is this something that I can do as a sole proprietor? A lot of that relates to two fundamental issues that we deal with in almost every transaction and that is taxation and risk of liability.
So, once we’ve effectively done the job of analyzing your needs and determining what vehicle, the next step is of course to try to understand the business as intimately as possible. I think the problem is if you’re not involved in mergers and acquisitions on a regular basis, this is not always the easiest thing to think about, because you don’t instinctively know what you’re looking for. Financial statements are just one aspect of things, but understanding what if any special licensing is involved.
You know is there a heavy environmental element to it that creates other risks that we should be paying attention to? Is there real-estate involved, in which case there are none of other considerations, but first and foremost the wisest thing to do is to sit down with a professional that has done this many times and help them guide you through the process of investigation of a business, and that is the most important thing you should be thinking about.
LAURENT TRUC:  Okay very good! So, you brought something up about surrounding yourself with your team, What does that typically look like? So, lawyer, accountant is that it? Do you in your experience think it should be a bigger team? Like how do you, who’s involved in these things?
LOUIE SOPOV A lot of that really has to do with budget, I mean ideally you bring as many people as you can to the table. I shouldn’t say that, maybe not so many, but you know my clients have sometimes used consultants which has proven to be absolutely invaluable, particularly with respect to obtaining and disseminating information. You know lawyers and accountants, there’s a cost associated with that.

I like to think that who are well worth money being paid, but sometimes consultants can be absolutely crucial in communicating information, obtaining documents, obtaining general things that may need to be discussed and dealt with. So, the team does not have to be especially large to be effective, depending on circumstances and it’s a case-by-case basis. Obviously if it’s a very large transaction then having a team that’s a little bit bigger, where duties and responsibilities can be distributed amongst the various individuals is helpful.
And how early do you start establishing your team? Do you wait until you have an acquisition target in mind or is it even before that? Does the team of both lawyer and accountant kind of Health put the story line to help you focus on here’s that business you should looking at, like where should they bring you in? It’s my view that they should bring us in as soon as they start contemplating the purchase. The rationale for that, is that oftentimes we get so far down the line of a transaction that fundamental issues are missed or aren’t considered and what ends up happening, is that we’re fighting with a psychological mindset where the parties have already established some understandings without having considered all of the issues, and of course we’re trying to go back on those things, and sometimes that creates friction between purchaser and seller, and of course it can cause some significant problems.

My experience is that typically, the sooner that you get your professionals involved the better, simply because you can address the concerns related to your potential purchase from the outset. So, for your particular listenership or viewership, if we’re talking about a businesses then we understand intrinsically that we have to start thinking about things that are specific to e-business. You know things as simple as making sure that web addresses and you know all of your internet technology is properly licensed, properly registered. What do we have to build around that? – The basic contractual issues, how is that business structured? Are the fundamental contracts that business has with its customers in good shape? What’s the likelihood of keeping this customer base? Is it driven simply as an online entity or is there a sort of personal connection between that particular business and potential consumers? There are so many things that can be considered, and should be considered from the outset that you’re professionals can really help streamline you in terms of your discussions, your inquiries and concerns.
LAURENT TRUC: okay So I think what is quite unique in this space, because it’s on the web, its global. There’s a lot of purchases that are inter-country, right we’re based here in Canada.
A lot of the acquisitions are in the US and we’re starting to see more and more at in Europe. How do you as a lawyer take a… is it the same approach or is it a different approach when you’re dealing with international boundaries like this?
LOUIE SOPOV: There are some things that will be very similar and there will be others that won’t. My experience in cross-border work that we’ve done in the United States and we will typically retain US counsel, where we have issues related to US statutes or user or consumer goods laws and those sorts of things I should say, probably should have said this from the outset, but I do practice in Ontario and so to that extent anything we speak about with respect to foreign jurisdictions is more guidance than legal advice so to speak, but and of course all of the commentary here is very general in nature.

So, I think it should be made clear to your listeners and viewers that everything is very fact-specific. So, the generalities here may or may not be applicable to your scenario, that’s why you should speak to somebody about your specific fact pattern in case scenario, but having said that there are numerous laws that are very similar in terms of Canadian and US jurisdictions, but of course we’re dealing with 50 states, each of which have different consumer laws and taxes applicable and contracts laws, while some can be very similar, others are very different.
So, if you are considering a US based business or purchasing a business that does a high amount of volume of sales to the United States, you should consider bringing on a US Attorney. it can be invaluable and of course the concerns are almost always the same. Are you in compliance with the local, whether that is municipal, state or federal law? Sometimes federal laws will affect your particular goods or services, sometimes they won’t. But this would be a good reason to get an American lawyer to be able to advise you and guide you on those areas.
LAURENT TRUC: Okay You brought something up around jurisdiction. I’ve always kind of scratched my head when I’ve negotiated a few deals that we’re out of the US and the paperwork always comes, the purchase agreement comes from their side, in their jurisdiction and then my lawyer would take a look at it and then all of a sudden it’s my jurisdiction on my side. How do you pick that? like what is the implication of yes and is it that big of a deal or is it something that’s just something to consider?
LOUIE SOPOV: Well, it has a huge impact, It really truly does. First of all; What set of laws apply? Certainly, if you’re a resident here in Canada and you’re based in Canada you’re gonna be more comfortable naturally with the laws that govern business conduct here, but even more than that. If you are in a dispute, whether that be with the seller or whether that be with your customers. Contracts always discuss where dispute would be determined and of course it is much more expensive to litigate in the United States, to have to retain additional attorneys to deal with those issues. So, it is important, it typically isn’t the issue that many deals fall over, but to the extent that you can negotiate the jurisdiction being in your own backyard. It’s advantageous than it is helpful.
LAURENT TRUC: Okay good to know. Can you talk a little bit about the difference between a share sale versus an asset sale?
LOUIE SOPOV: Yes, okay so I’m finding in our world on the online world, it’s almost all asset sales. However, I find in Canada there seems to be owners that when they’re selling, they prefer to sell through a share sale, because they’re getting some benefit. I know we’re right on the cusp of tax law. Its Twitter tax discussion at this point, but love your perspective on this. So a a lot of a that decision is really dependent on tax law and you know I’ll have to express the fact that I know just enough about tax law to get myself into trouble, but as a business lawyer obviously it’s something of great concern. So, it’s something that we deal with on a regular basis, the push and pull on share sale vs. asset sale is usually driven by are you buying or are you selling. mm-hmm generally speaking the reason you would prefer a share sale if you’re a vendor, is because the tax treatment of the sale of the property you’re selling.

So, in a share sale you’re selling shares which would be considered capital property, sale of capital property attracts capital gains tax, here in Canada we also have the benefit of having a personal lifetime exemption against capital gains. Now it’s not Universal, there are special qualifications and this is where you’ll need to talk to your accountant to determine whether the shares of the business that you’re selling qualify for that type of treatment, but it could be a significant tax savings, even if you don’t have the applicable capital exemption space, a capital gains taxes are effectively the cheapest form of tax you’ll pay on any sale.
Okay, from a purchasers perspective there are numerous reasons why you would want to try and avoid necessarily buying shares, I know this might sound like the most horrible example ever but I find for most of my clients or resonates, so when you’re imagine buying a frog, you know the frog representing the business, when you’re and just imagine that frog having puppeteer strings attached to it, when you’re selling shares you’re effective selling control of the strings, when you’re selling assets you are really and truly selling the guts of the shell of the frog, so maybe a lung, maybe a hip, a leg. When you buy the when you buy the strings you buy the frog with everything in it, so if it has cancer, if it has any other illness or disease you’re getting the whole package, and then it’s left to you. it’s not to say that you can’t compensate for that in the purchase price, because certainly we can look at a liability that’s inherent in a corporation and say well we can put a price tag on it, and then we can reduce the purchase price or deal with it in some other manner. For a purchaser the asset purchase allows you rather than to have to put a price on the negative aspects of the business, it allows you to cherry-pick what you want from the business. So what it does allow you is a fresh, what they call adjusted cost base so when you’re talking about capital property if you’re buying machinery equipment that sort of thing, there would be some advantage to getting a fresh new cost base to it, why because then you can depreciate that asset and get the value of that depreciation from a tax perspective.
The other thing is you can excise liability and that’s really truly the benefit to doing the asset purchase agreement is being able to exercise the liability and really only purchase those assets that are a value, the difficulty of course is when you’re trying to do that, you have to be meticulous in your due diligence not that you wouldn’t in a share transaction but you do have to be meticulous in your in your due diligence and your document drafting to ensure that those liabilities do not affect the assets that you purchase.
LAURENT TRUC: Got it, okay. Can we talk a little bit about corporate structures, and when to use which and the cost behind them? So you and I had a conversation not too long ago, I had always been given the advice when you buy anything that has an asset to it, and you’re gonna run it as a business just incorporated to easier, but there’s so many different forms or incorporation and their sole proprietor there’s really just running it and just having a little of insurance that kind of covers any problems that you may have. Can you walk through a little bit of some of the options and I don’t know if there’s kind of the 50,000-foot level advice to be given, with how you know compromising kind of some components?
LOUIE SOPOV: It seems like a very simple question, but the answer can be very complicated and it can be very simple as well, mm-hm I know that there are certain lawyers and attorneys that believe that incorporation is always the right way to go, I don’t happen to subscribe to that view. It’s always an analysis of risk, primary reasons again for incorporation are tax and liability. So, the nice thing about incorporating is that if you have a functional business with employees where you’re not the sole individual that’s performing all of the work, then you incorporate, and that shields you from third-party liability. mm-hm it won’t shield you from liability for instance, if your landlord says well, I’d like a personal guarantee on top of the corporate signature, or if the bank asks you for a personal guarantee on a loan obviously you’ve got direct liability there. But by and large as it pertains to third parties that don’t have that sort of personal guarantee element to the contract of the relationship, would not be able to sue you personally, unless you have personally committed some wrong.
And the other thing to understand too, is that I think sometimes people think that it’s absolute immunity and of course it’s not, because there are certain circumstances in which the capacity in which you’re acting could be very important. For instance, our excise tax Act, provides that directors can be liable for HST that has not been remitted. If the corporation doesn’t have enough funds to pay those amounts, so environmental legislation also has some more rules for directors, so when we’re assessing whether or not we want to incorporate the thing that we have to keep in mind is the type of business that I am running, sophisticated enough that I require a corporate existence, and sometimes just from, I guess from a prestige perspective, it’s good to have, because the minute people hear corporation whether it’s in your basement or in your shed.

There tends to be this assumption or Level of level of sophistication, but having said that, it’s really important to understand what type of risks you’re running into, if they’re not significant and you could insure over them, then certainly being a sole proprietor would not be a problem, in fact it would be a lot less expensive from a time and financial perspective. Because you don’t have separate filings, tax filings, that is you don’t have to pay accountants for two sets of filings, one for the corporation, one for yourself. It just if an insurance policy can cover you for the type of risk you’re exposed to then it may be the cheaper the cheaper way to go without having all that additional administration, but having said that as your business becomes more sophisticated, as you acquire employees and those sorts of things.

Those corporate protections do sometimes become very important. The other thing to think about is the complexity. If you’ve never run a corporation before it’s important to get proper advice from your accountant, just to how money goes out. So, if we’re a sole proprietor and we’re simply selling goods, your expenses can be deducted against your personal income of all sorts and again this should be checked with an accountant, but generally speaking that would be the case. You’re not doing a separate set of books records and when you file, it’s one filing and the money is already in your bank account. So, there’s no need to necessarily characterize the income. okay If you want me to go further into the tax issues that arise out of corporate entities, I certainly can do that.
LAURENT TRUC: yeah, I think that would be great. I think those are probably the two top conversational pieces that I did into people, like do any of the corporation and right away they’re like great how much is that gonna cost me? What does the falling look like and then what are the benefits tax wise of doing it versus not doing it? So, I think that would be helpful if you…
LOUIE SOPOV: So, costs… this cost can certainly range quite a bit. I can tell you that our just run-of-the-mill ontario-based corporation will usually cost somewhere in the neighborhood of about eleven hundred dollars, give or take. That’s all in your corporations done, it’s all of your incorporating resolutions which you’re required to put together. Your bylaws, the issuance of your share certificates, subscriptions, all those things they’re kind of included in the package and you’re ready to go. Sometimes people opt to have other professionals incorporate their companies, this is not to say that it can’t be done.

I just find typically what happens is they will literally file for about three hundred and fifty dollars or four hundred dollars articles of incorporation and that’s all you’ll get and unfortunately there are a lot of deficiencies with that. Just so people understand the cost it, costs about $300 plus HST to register your business in the province of Ontario. So you know when people are talking to you about fees and expenses, it’s important to understand that fees are separate from the amounts that have to be paid to formally register your business. From there you’re required to keep annual minutes of meetings or annual resolutions under the Business Corporations Act of Ontario.
You’ll be required to reappoint directors and it seems somewhat, but the rules for Bell Canada and Rogers are sort of the same as police for part of that business where you’re at the shareholder Grand Poobah and coffee boy all at the same time and sometimes you almost have to be schizophrenic to understand which role you’re playing at any given time. But by large those annuals will cost you anywhere from about fifty to two hundred, two hundred fifty dollars if you’re having a lawyer’s office prepare them for you annually and then of course depending on the complexity of your tax filings. This is where you can incur significant cost, if you’re doing things on sort of a notice to read or even less than that basis. It may cost you anywhere between fifteen hundred to five thousand dollars depending on who you’re working with and of course if you require for any reason audited financials, the sky’s the limit there, if they can be significantly more than that. So those are the rough annual costs of just maintaining the actual corporation.
LAURENT TRUC: Okay very good. If you don’t mind let’s bounce around a little bit. Can you tell us the definition of reps and warrants and what to, when to use them? What to consider them? So especially in the context of buying an online business what would kind of be the standard clauses you would typically see in a contract?
LOUIE SOPOV: So, the reps and warranties or representations and warranties and if you don’t mind, I’m just gonna step back and say that every agreement of purchase and sale has about three or four distinct elements to it. So firstly, we need to understand what we’re paying for, what we think we’re getting and from there if there are any adjustments to the purchase, price up or down than those… the rules surrounding how we determine the final purchase price, those get dealt with. Beyond that you move into the realm of what are called representations and warranties and this is the show-and-tell portion of any agreement of purchase and sale.

The representations and warranties are absolutely critical for a purchaser and the push and pull between vendor and purchaser. As always, a seller will always want to minimize or eliminate representations and warranties and a purchaser will want to make them as broadly as possible. What are the standard representations and warranties that we ask for? One of the primary things we’ll say; we’ll ask a vendor to tell us is have you paid all your taxes? Is there anything out? Is there anything outstanding? Because if we buy the shares of a corporation and this is where some our earlier conversation comes back.
There are ongoing obligations of a corporation, just because control changes, it doesn’t mean the corporation has to stop filing taxes or it gets to forget its past, In fact, it’s the same entity. So, if there are ongoing disputes with CRA or the IRS in the United States, those things don’t get cleared up, because of a change of control. So, we have to ask the questions and are there any labor issues? Do we have any pension plans put in place? Do we have any benefit plans put in place for employees? If we do and they’re significant. Are all of the employer obligations lived up to?

If there’s any environmental element, I mean even if there is a significant one. Environmental is good to cover, because if you’re leasing space or owning space you want to make sure that you cover that, because unfortunately even the smallest bit of chemical nasty business is going to cost you a million dollars to remediation. So the representations and warranties section is really crucial to due diligence and typically what will happen is, we’ll say tell us that you’re not being sued or if you are being sued, please show us all of the litigation and let us determine whether we’re content with the risk associated, with those pieces of litigation. Essentially what we’re trying to do is make sure that what we bargained for is exactly what we’re getting.

And typically to go back to the question you asked earlier, we said well what are we looking for? So, typically what will happen is somebody will say okay I’ve seen the website and now I’ve seen some financial statements and this sounds like a really good idea, but the financial statements will not show us everything. They won’t show us commitments, they won’t show us you know who necessarily the top 10 contracts for a particular business, might be who’s your you know what’s your biggest demographic or target demographic.
Right, how do we keep this business? It’s in the reps and warranties where we ask those questions surrounding numerous issues, that we find out where the problems are and then based on what we hear, we either accept the risk and say we’re fine to proceed or we say the risk is too great I’m not necessarily prepared to move forward, but from a remedy perspective they’re important, because as we stated earlier if a warranted car park goes boom somebody fixes it for free, representations and warranties are the purchasers stick, so to speak, so that if somebody has told us something false or has misrepresented material fact, we have legal recourse. So we can sue on the value of that misrepresentation.
LAURENT TRUC: Got it, do you up front define the value of some of those components or do you keep it broad and then once that situation appears you then address it with some financial penalties or whatever it is.
LOUIE SOPOV: The general approach is to keep it broad, but there’s certainly nothing preventing you from attaching a dollar value to something. One of the cases where that would be true is if somebody’s being sued and you know there are general damages being sought. Maybe there are punitive damages being sought, maybe it’s not significant, but some. it’s impossible to determine where a lawsuits gonna end up. mm-hmm so you know maybe the purchasers tolerance threshold is $100,000. So, we say okay as long as this doesn’t cost the corporation any more than $100,000, then we’re okay. If it does then we’ll recover the money back by way of either a hold back or you’ll pay us back after the fact.
LAURENT TRUC: Got it. okay is this where things get difficult in a negotiation? So, you’ve done a ton of these, so when you typically see the process, where does the process get hung up? Is it on the price negotiation? Is it on the reps and warranties? Is there another component of the contract that’s difficult?
LOUIE SOPOV: it’s a very case-specific question that you’re asking. um I wish there was a uniform answer, but typically speaking, each deal has its own life, so to speak. it’s a very organic process, so sometimes it could be the purchase price or how we deal with deductions and you know particularly this will be the case or during dealing with something that sometimes referred to as an earn out.

So if we’re buying a business on the basis of existing business, one of the things a purchaser is going to want to do is ensure that the minute that the business is transferred all of the contracts aren’t going to leave the fold, so in other words are there contracts that are so specific to the actual shareholder that’s selling the shares or the people of the principles behind the business or is the business base really part of the business? So sometimes what we will say is on the assumption that we can maintain a million dollars of sales for the next three years then we’ll give you price X, if it drops, its price Y. Now it seems simple and straightforward, the issue that comes up is typically well you know we understand your concern purchaser that maybe these contracts are going to leave the minute I saw the business, but what if it’s your stewardship of the business that causes the decline in purchase price and of course you can see that there really isn’t an easy answer to that.

It really is about the party’s trust and belief in one another and then of course gauging the risk associated with whatever you agree to and the same thing is true of representations and warranties. I mean typically as a vendor you know one of those standard legal phrases that you’ll see is the vendor or the corporation and the vendor are in compliance with all laws. Well that’s a very nebulous statement and lawyer you know well first of all most of us will not even… lawyers will not know all laws applicable to that particular business.
So, when we’re counseling our clients, I’d say Laurent there’s no way you’re saying you’re in compliance with all laws, because if we miss one minuscule little thing, it’s now source of liability for you in the future. You know it’s just the very nebulous nature of warranties and the push and pull between purchaser and trusts and vendor interest that sometimes caused the difficulties. I wish I could say it’s not lawyers, but sometimes it’s lawyer driven in the sense that, you know if I’m being realistic a lawyers been burned by an issue in a past deal and then suddenly it becomes the end all and be all in the next.

So personalities are important and I’m diverting, but if I could give another piece of advice to clients it’s to have a good level of communication with your representation, whether that’s accountants or lawyers and ensure that if things are being argued about it’s because they’re really important and you know they necessarily need to be dealt with.
I always say to clients there are issues and then there are deal-breakers, some things are so fundamental to a business that you cannot afford to allow a purchaser or conversely a vendor to insert a particular clause or remove a representation warranty, but that’s really the process of getting down to a deal, is working through what are the issues, figuring out what the stumbling blocks are.

You know you in the initial exchange of an agreement of purchase and sale there may be no less than 40 different paragraphs that are amended, well by the second one it’ll be four and by the third time around it may be two, but those two may be really big and typically not everyone is going to show their hand upfront. So as you Whittle the issues down to the quote-unquote deal breakers, that’s where it’s really a function of understanding what your risk tolerance is, whether you’re prepared to bend on something and if you bend on it, is it still the same deal that you bargained for? And unfortunately, the answer is not always yes.
LAURENT TRUC: Make sense. You brought up a good point there around; one listening to your lawyer, but being very open. I mean it sounds like relationship between client and lawyer are critical to make things smooth and easy to go. Any recommendations for somebody who is ready to go buy a business? How do they find the right lawyer? Are there different levels of corporate lawyers and is there something they should be looking for in that kind of first meeting in terms of building rapport? What do you recommend?
LOUIE SOPOV: Unfortunately, there’s no real easy way to, you know it’s kind of like saying you know can you find me a good doctor. It’s really hard to gauge, when you’re not part of the profession. It’s really hard to gauge whether someone really is good or bad. So mmm yeah I mean typical ways of doing it is speak to friends, family, colleagues that have used lawyers in the past. I think that’s usually the safest bet because their experience will be more meaningful and typically people won’t want to refer a lawyer that’s been holding. Absolutely oh yeah I can almost not imagine a scenario in which that would happen.

So I think that’s one good way of approaching it, but what I do say to people is you’re not bound to somebody just because you’ve paid them a consultation fee and sat down with them for half an hour to 45 minutes to an hour. More than anything in my view, I don’t care what professional relationship you’re talking about. Personal fit makes a very big difference and you will sense within the first 30 to 45 minutes or an hour of a consultation, you’ll have a good idea whether the person you’re sitting across from makes you feel comfortable, has answered your questions in a way that you can understand them and seems like a good fit, but unfortunately I wish I could tell you there is a surefire way to make that decision.
There really isn’t and sometimes good lawyers aren’t necessarily a fit with certain clients. So for me I’ve always said to my clients ultimately, if you feel that you can trust the individual and you feel like you’re getting the information you need and they’re actively engaged in your file then those are signs that that’s a person you may want to retain.
LAURENT TRUC: Excellent! Very good. For somebody who’s thinking about moving forward are there resources you can suggest for them to learn a bit more before they go out and should they just go out and get a lawyer or is there a little bit of education that’s always helpful, from your perspective that the client comes with some knowledge?
LOUIE SOPOV: I think reading up on the industry that you’re planning to get involved in, I mean of course if you’ve been involved in it for a long time, then maybe the short answer is retain your lawyer, retain your accountant, talk about what you want to do and you get started from there. But I’m a big believer that it’s important to understand what your intending to buy. So, if you’re purchasing a business you should have a fundamental understanding of the things that you should be aware of. I don’t think you can expect your accountant or your lawyer, unless you know so, for instance if all they do is dental practices and they’re buying and selling dental practices, then there may be a higher level of knowledge or expertise with respect to general issues that affect that type of industry or that type of transaction. mm-hm but you know I mean if you’re buying a website that sells women’s shoe, level you’re likely not going to get someone who’s gonna be knowledgeable in Footwear.
I know things for a way well they may not necessarily always be issues that are really fundamental or core to the actual transaction. Determining value is always is always very difficult. I know that there are a lot of people that would disagree with me, I’ve always been of the view that EBITA is somewhat of a economic voodoo. You know why one time multiple here and why attend time multiple there and I’m sure there economists that can make that case for me, but to be frank it’s really in 15 years of practicing exclusively corporate commercial law and in 20 years of practicing law really to me purchase price is always where one person feels like they’re getting fair value for selling their property and the other feels like they’re getting fair value for further purchase, and there’s no right answer to that, but if you understand the industry, if you understand the business and you understand potential, it helps you understand how long it takes you to get your investment dollars back. How long does it take you to get to the point where you making some significant profit? So, I would say simply put in a very long-winded answer to a very short question. Any materials that can help you understand what you’re buying, read them and as far as the legal and the rest of it, that’s why you pay for it. sue me accounts for that in.
LAURENT TRUC: Got it! All this was super helpful. I think it was a great primer. Any last pieces of advice for someone who’s ready to take a jump, especially I think that the biggest gap is somebody who’s worked in corporate right now and feels like they want to buy their first business? it’s a pretty big leap right going from corporate entrepreneurship. So, you’ve covered a ton, is there anything else that we haven’t talked about that you would recommend somebody to keep an eye out on something?
LOUIE SOPOV: Yeah, I think most importantly it’s just to be vigilant, there are always opportunities to be purchased and the first deal doesn’t have to be the only deal. My biggest four concern is for my clients who are kind of like the young couple entering into a bidding war on a piece of real estate. The fear is always there’s going to be nothing else out there and I have invariably found that to be untrue. So points when you’re approaching a business, it may look great from the outside, but don’t get your heart set on something until you’ve really had a chance to open the hood and look underneath and see what’s really truly there and losing a deal is not necessarily a bad thing. I was told once when I started practicing law, No Deal is 100% of the time better than a bad deal mm-hmm and I think that is the fundamental flaw from most first-time buyers, is they feel I’ve spent time money and energy getting into this and then they feel like they have to close the deal at all costs and so I would say be vigilant.
Trust the people that are working for you, if they’re telling you that there are some things that are horribly wrong then it’s time to reevaluate how badly you have to close the transaction nor is it time to maybe reconsider and look at other options and I think to me that’s very important for first-time buyers to understand that the first opportunity isn’t always the best opportunity.

LAURENT TRUC: That’s a great point. When I look to buy a business for myself or for somebody else the first thing they might… my kind of cheat sheet and what I look for is try to find something wrong. it’s a very pessimistic way of looking at it, but to your point I’d rather quickly find something wrong and get rid and go to the next thing than try to force the deal that at the end I’m going to regret, because once you got a deal you’re married to it and it’s not easy to get rid of it afterwards.
LOUIE SOPOV: Absolutely!

LAURENT TRUC Very good. Louie this has been absolutely fantastic. If somebody wanted to contact you, reach out to you how would they do so?
LOUIE SOPOV: I could be reached at Preston crouch at 905-866-5152 and I can always be reached by email at
Perfect Louie Sopov so I’ll put all that in the in the notes as well, so people can reach you very easily.
LAURENT TRUC: This has been wonderful; is there any other less closing comments you want to make? I’ve really truly enjoyed this and I’d be happy to join again if you feel I can help you or some of the people that are listening to you and watching you on a regular basis. Yeah it’d be great as especially as we go through more of these, we’re gonna run into experience, there’s like let’s get Louie back. You’re talking about this…
Perfect Louis thank you very much enjoy the rest of your afternoon.
LOUIE SOPOV: Thank You Laurent have a great. Take care.
OUTTRO: Thank you for joining us on this episode of the Mad Profit Podcast. We hope you enjoyed the show. Don’t forget to subscribe on iTunes Google play or the listening platform of your choice also check us out at for more useful information and resources to help you achieve your investing entrepreneurial and business goals. See you next week on the mad profit podcast.
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