One of the interesting things about being a business broker is seeing how different buyers pursue businesses. Here are some observations on why some business buyers are successful and others are not.
Although the money in a business offer is an important consideration for most business owners selling their business, it is not the only factor. If the owner decides that the likelihood of getting that money (closing on the deal) is not good, then they may accept another offer. Here are some factors that affect how owners, and business brokers, evaluate buyers and the offers they present.
One of the most important things to do if you are buying a business is be open, honest, and forthcoming about yourself and your financial situation. You want the business seller to be this way. You need to be also. Problems in your financial history may not be a deal-breaker if you explain them. But, being unwilling to provide information about you and your financial situation is likely to cause a business seller and business broker to be unwilling to deal with you.
You also need to be someone that is not too hard to work with. Getting a deal done is usually a matter of give and take. If you’ve shown an attitude that everyone better do things your way or else you won’t pursue the business, you are not likely to get the result you want. Typically, the first step in the process is signing a Confidentiality Agreement. Most business brokers will consider a few edits to their Confidentiality Agreement. But, if you are re-writing it, that is not a good way to start. The business broker and seller are questioning that if you are this difficult to get started with, how hard will you be down the road in reaching agreement on an offer and a purchase and sale agreement?
Make sure that the information you request to present an offer is reasonable. Keep in mind that the owner is busy operating their business and responding to requests from other buyers. Request the minimum you need to present a business offer. Also, this is not the time for due diligence. Make an offer assuming that the information you are given is accurate. If during due diligence, you find it is not, that is the time to revise or terminate the deal.
This leads to another thing to keep in mind. Time is important. Business brokers have a saying “Time kills all deals.” What that means is that the longer it takes to get a deal done, the more likely it is that it won’t get done. There are some good reasons to move as quickly as possible to present an offer to buy a business. The most important one is that, if you are pursuing a desirable business, there will be other buyers. Another buyer may move quickly. I’ve had more than one very good buyer meet with an owner and then present an offer and negotiate a deal on the same day, Another reason to move promptly is that, if you take weeks to present a business offer, the seller gets the impression that you move slowly and it will take a long time to finalize a deal with you.
Here is the last thing to keep in mind. There are many buyers and business brokers want to work with ones who are likely to buy a business. All of the issues I’ve mentioned in this blog influence whether a business broker will be willing to work with you and show you businesses to buy. As I wrote at the beginning of this blog, the price you are willing to pay is not the only factor to be considered. All of the other factors affect how likely you are to close on a deal and how attractive you are as a buyer to business sellers and business brokers.