Working with buyers
If you are selling your business, the best advice available on the subject of buyer relations is to exercise patience and understanding. If the relationship between a buyer and seller gets sideways, the deal may be doomed. The transaction may still close, but continued animosity could have a negative effect on the sale price and the overall deal. Let us not forget, after closing buyer and seller will still have to work together during the transition period.
In many instances, the larger the transaction, the better the relationship between the buyer and seller. In our experience, smaller deals seem to have more emotion involved. Our smallest and simplest deals see the principals get into heated negotiations early in the transaction. It greatly complicates the situation and frustrates everyone involved. This can make for hard-to-close transactions or, worse, lost deals.
The seller is emotional because the business that is up for sale is his “baby.” The buyer is emotional because he is buying his future in what is probably the biggest transaction of his life. Emotionally backed transactions are frequently a tight rope. The best antidote for this potential trauma is for each side to constantly place themselves in the other’s shoes.
Picking the right buyer
Most buyers coming out of corporate America will have a professional resume, which can be examined to determine if his experience will be beneficial in running your business. In addition, you will want to check personal financial statements.
Regardless of the method of financing, the buyer will be required to have a substantial down payment. Most likely, the buyer will need more money to get into your business than you had when you started. Having the required funding does not guarantee a buyer will be a good prospect but it does minimize the risk. If a buyer invests the resources necessary to make a significant initial injection and, in addition, has working capital, you can be assured that he will do everything it takes to maintain the success of the company.
The usual process of selling will involve some sort of get acquainted meeting between buyer and seller. Expect the buyer to ask most of the questions in these initial meetings. As a seller, you have already disclosed much proprietary and financial information on your business. This is a good time to get additional information from a buyer. In addition to a resume and credit check, it is a good idea for the owner to ask the buyer what plans he would have for the business. This may be a hard question for a buyer to answer since he really does not know the business, but how he responds can reveal why he thinks the business is a good fit.
His ideas and answers can help you determine if this is a prospect with whom you want to work. If you have a good feel for the buyer, you are in a much better position to negotiate the sale.
Timely information requests
During the acquisitions process of selling your business there will be a continuing demand to supply the buyer with information. The requests may seem never ending. Your support team (CPA, business broker, etc.) cannot forecast every possible document that will be required or requested, since every deal is different.
Copies of all leases and notes to be assumed may be needed. Various accounts receivable and payable reports may need to be updated. Therefore, a seller should be poised at all times to get the information needed to the buyer in an expedient manner.
Searching for a Business Broker?