There are many reasons deals can fall apart, some of which are too crazy to be believed. But we do see some that occur regularly, and in the hopes of educating our readers so that they don’t fall into these same traps, we want to discuss three of them.
It’s not important that the buyer and seller become best friends. But we do think they should meet. And they do need to have healthy professional and personal attitudes before, during, and after the transaction.
This process takes time. A lot of it. It will really feel like a job, at times. You will need to keep in mind that this is just how business transactions happen. Boxes have to be checked. Diligence has to be done. Leases have to be negotiated and handed over. Banks need to look at spreadsheets. Sometimes the SBA is involved. It’s not personal. It’s just business.
This attitude also means that a buyer doesn’t have an ego-driven notion of what the business is worth. A business’ price is subject to two things, primarily. A valuation, and market conditions at the time the seller goes to market. A buyer can object to these realities, but the ones who get to a successful transaction are the ones who are willing to undergo an attitude adjustment and get away from what they think the business is worth and focus on what the market thinks it’s worth.
At times, negotiations and diligence items can feel personal. While those feelings are understandable, the reality is that none of it’s personal. Buyers are looking under the hood, trying to make sure they understand everything they can to make a successful go as a new owner. You’re not used to being scrutinized as an owner, after all, you run the place. When you are feeling discouraged or want to lash out, stop typing that emotional email and give us a call. What’s great about being a broker is that we’ve seen both sides of transactions so many times that we’ve probably come across your particular flavor of discontent (and we know how to help you deal with it).
2. Failure to Disclose
There are many things that can come up before and during a transaction. People can have personal problems that directly affect their ability to sell a business. For example, a business partner can end up refusing to cooperate or a spouse may not be willing to wait until after a transaction to file for divorce. Sometimes leases or liens (or even court cases) get “forgotten” about.
There are many remedies we have to deal with challenges, but we can’t help fix what we don’t know about. There are a number of times that we’ve been in the weeks, days, and even hours leading up to closing when we find out something that puts a screeching halt on everything. The retort of, “I didn’t think it was that big of a deal” is usually heard. Anything you can think of that you might disclose, mention to us. You’re never going to hear a broker respond, “Why did you waste your time telling me that?” More information means we’re better equipped to help you.
3. Business Neglect
As we mentioned above, due diligence and preparation for a sale can (and often does) feel like a job on top of running your business. The more prepared you are (clean books, timely tax payments, coherent financial statements), the less time you are going to have to spend getting those in order for a buyer. Your business and your employees need you to continue to function at your best not only for your own financial well-being (you don’t want the business to stop performing well) but for the incoming buyer (you want them to have the best start possible).
In the worst cases, businesses get neglected enough by the seller to cause a material change in the value of the business, which can lead to a renegotiation of the price. Don’t let that happen to you. Keep your eye on the deal and your business, knowing that patience and a good attitude will bring you to a successful conclusion.
We want to make sure your business deals get to the finish line, not fall apart. Contact us today to see how we can help you!