Why Do Sales Fail?

sales failIn a previous article, we discussed how long it takes to sell a business and how and why an accepted offer is only a phase in a multi-phase process.  

Many things can intervene throughout the process to prevent a sale from closing.  

In this article, we want to explore just a few of the various ways a sale can fail and what you can do to avoid them.

Seller Side

  • Failure to disclose.  Whether it’s to us as brokers or to the buyer, sometimes a seller simply fails to disclose something that has a major impact on the deal.  This can never entirely be prevented, but buyers have to follow our lead as brokers and never make assumptions: ask the questions necessary in your due diligence and keep lines of communication flowing and open.
  • Failure of motivation.  The seller may not have had a good reason to sell or was pushed into it against his/her will, and so during the due diligence process may simply slow down or quit entirely because of no requisite motivation to close the deal. Sometimes, reminding the seller why we’re here is critical to keeping the deal going.
  • Failure to investigate.  The seller may have failed to consult his legal and accounting team about tax consequences and wants to change deal points too late into the process.  This can sometimes initiate a breakup of the sale entirely due to suspicion of bad faith on the buyer’s part. Make sure that whatever side of the deal you are on, you are completely briefed on the financial and tax consequences of the transaction early in the process.

Buyer Side

  • Failure to leap.  Especially for first-time business buyers or owners, there is a critical stage that is a mirror for the seller’s decision to sell: the decision to sign on the dotted line and become a business owner.  We’ve seen it before.
  • Inability to secure financing.  While people may be creditworthy sometimes circumstances arise that prevent them from getting financing which is part of their overall offer, and without that bridge, the deal falls through.  As a seller you need to properly scrutinize the various buyers who are courting you and examine their fiscal health as part of your decision matrix.
  • Undue influence of others.  Again, for first-time business buyers or owners (or even for veterans) there will be the naysayers in their lives who tell them not to do a deal, and remarkably, sometimes they listen, contrary to everyone else’s advice.

Both/Neither Sides

  • Foreseen or Unforeseen Legislation or Natural or Unnatural Events.  We sometimes think we “know” that legislation will pass, and it doesn’t, and other times, it takes us out of the blue.Same thing with natural events like a hurricane or unnatural events like 9/11. All of these things can adversely affect any number of businesses, either physical locations themselves, parts of a supply chain, or a customer base.They can sink a business deal with no warning, and it’s something to keep in mind, not because you can prepare for it, but to be resigned to the fact that there’s nothing to be done but to accept it as one of life’s possibilities.
  • Landlords/Accountants/Attorneys.  Yes, we’ve seen landlords, accountants, and attorneys sink perfectly good deals.  This isn’t to say we don’t like them. In fact, there are all three of those types on our team here at Apex!But what it means is to make sure from the beginning that all those people – on both sides of the deal – are aligned with the goals and vision of the outgoing seller and the incoming buyer.It’s a shame to let those peripheral to a deal sink it, but it can only happen because the buyer and seller don’t take charge, keep an even keel, and work hard to resolve challenges.

The best way to keep a sale from failing is to have a broker in your corner helping you navigate the waters of what will be one of the most important transactions of your life.  Give us a call today to see if we can help you.

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