The human eye often can’t see them, but DEAL KILLERS are laying all around you during the process of selling your Business. They lurk in the shadow of optimism and can strike at any time if not carefully watched for. Often, the deal killers can be avoided if both the buyer and seller approach the transaction with a velvet glove and solid core values. There are literally 100s of ways a deal can fall apart when selling your business. Overpricing a business, keeping bad books and records, down to a business not performing as the seller presents it as-these things are more obvious, but below are the 5 most common ways to not sell your business.
1. Hiring an incompetent and Lazy Business Broker
You must hire a seasoned professional to sell your business. No, do not try to sell your business yourself either. It is a bad mistake. You may as well try to do your own dental work. But things could be just as bad if you hire the wrong broker. There are some good Business Brokers out there that know what they are doing. They may know how to put a deal together and what the process is, but that is just the basics and you need much more than that to get your Business sold. A GOOD Business Broker makes it his life. He is on it non-stop and does not quit until the job is done. A good Business broker has a good web presence, he does it full time, and is dedicated to be the best in the industry. A good Business Broker not only knows how deals are done but he should also have a strong background in banking, negotiations, buyer profiling, and the broker should have a good sniffer. Sniffer you say? Yes, a good sniffer for the right fit, the right buyer for the right seller. A good Business Broker should also have a good sniffer for the right bank to get behind the deal. He should know the bank that has the appetite for your particular deal and wants to do the deal, and get it closed. A good Business Broker will be in contact and will be engaging buyers to look at your business. A good Business Broker will teach you how to approach things in the meetings, so you don’t become the one who gets in the way of the deal happening. So many things go into being a GOOD Business Broker, that you must do your homework and hire the most competent and aggressive broker out there. If you don’t, you could waste a lot of time and suffer pain in the process with no result in the end.
2. Attorneys and Over Lawyering
Nothing spells disaster better than OVER-LAWYERING. If you have a Business worth selling, and a GOOD Business Broker behind you with a good buyer ready to buy your business, watch out for a deal-killer that could come in and wreck the day; the buyer’s attorney. It may sound odd, perhaps downright crazy to assert that a buyer’s attorney could be the problem of the deal, but it is true. You see, a good Business Broker knows more about selling businesses than 99% of attorneys out there. A good Business Broker also knows the banks and the SBA underwriting. It JUST SO HAPPENS that banks have their own attorneys. It also JUST SO HAPPENS that the SBA has their own attorneys. Banks and the SBA program have strict guidelines on how things get done, and if you do not play by their rules the deal will not get funded. So, you are right at the point where you want to make a deal with the buyer and the Business Broker is working out all of the details such as purchase price, down payment, earnest money, time of training or transition, the assets that will go with the business, the proposed Real Estate value (In some cases), non-compete details, and more. Just before the buyer decides to jump into the deal he may say “Let my attorney look into this”. At this point, you should know that not only for you as the seller, but also the buyer, a deal killer is about to bite like a snake you didn’t see. You see, attorneys are paid for CLOCK TIME, and they know nothing about the “deal” the Business Broker has negotiated between buyer and seller and the bank. Secondarily, the bank is the one in control and will dictate how the documents look, how the asset purchase agreement is drafted, and if it is approved before they will fund the deal. This is usually a rooky mistake by a buyer who doesn’t really trust themselves and they think because they know an attorney, that the attorney knows best. It could not be further from the truth. Relying on an attorney as a buyer, is THE deal killer most of the time. A GOOD Business Broker will not invite an outside attorney into the deal, rather he will use a neutral 3rd party attorney to draft the asset purchase agreement for the bank and await any changes by the bank’s attorneys in the underwriting department. If you have a deal about to take place, it doesn’t matter if you go wake up Johnnie Cochran and the dream team and the bank that is underwriting the transaction in accordance to SBA guidelines is going to have the say in how things go, not the attorney that the buyer thinks knows best. In addition, once the asset purchase agreement is complete and ready for the bank to approve, this too is often when a buyer decides to take it to his or her attorney and “Just have a look at it”. Well, again, attorneys are not paid to get deals done, they are paid on clock time. Nothing against attorneys, but if they are paid to argue over language on an agreement that 99.9% of the time the language would not make one difference in a deal, then they are wasting time and money and time kills all deals.
3. Time- Time Kills All Deals
A slow deal will be a dead deal most of the time. If things are dragging such as the buyer is not responding to the banks request for underwriting, or the seller is not producing speedy updates of the financials, or someone is “waiting on my accountant”, or the bank is not aggressively working to get the deal closed, you are looking at the 3rd biggest reason why you won’t sell your Business. Be sure that the Business Broker you hire is “on it” and he will make sure that everyone else around him is on it as well. “SUCCESS LOVES SPEED” Speed and dedicated effort to deals is like water to a flower. Without it, it will die. Be careful not to let time kill your deal- you will not sell your business. Be quick to get what you need as the seller and be sure the Business Broker is on top of critical things for underwriting such as life insurance and tax verification. Without a Broker who is aggressive and on top of things, you are taking a chance that TIME will kill your deal.
4. Difficult People-as in Buyers and Sellers
Next to bad records, a seller or buyer with a difficult attitude or approach to the sale is a deal killer.
Very profitable businesses with great records, good cash flow and an outstanding history should have sold, but did not, due to an owner’s personality and attitude. The selling process is a killer for everyone involved, especially the seller. The “I do not have to sell” or “Take it or leave it attitude” does not enhance the acquisition process. Selling a business must be treated like a marriage, not a divorce. Back to DEAL KILLER #2, would you bring your attorney in to get married? Or would you more than likely bring your attorney in to get divorced? You do not want your deal looking like a divorce, so be nice. After all, how many friends have put a million dollars in your pocket in your life? This buyer may be the best friend you ever had. Treat him accordingly. What is most mind-boggling is when a seller shows such bad attitude. By all rights, the buyer is the one in the position to spend money and be nervous yes? It is puzzling when a seller gets his attitude in his own way. Equally, if a buyer is coming to the table being anxious, nervous, not trusting of the process or the broker, much less the business and the seller—you got a deal killer in the process. A GOOD BUSINESS BROKER knows who is and who isn’t a deal killer in a buyer, and will more than likely gently run that buyer off of the trail so not to delay or slow the deal, or worse yet; get the wrong buyer to offer on the business when the right buyer would have came along and bought it without all the strife and attitude.
5. Reluctance to Reveal to Employees of the Sale
Most of the time sellers are apprehensive to tell the staff of their company that he or she is deciding to sell. This is understandable in the beginning but let us remember here- AT SOME POINT THEY HAVE TO KNOW. If a seller is not prepared to tell his staff that he is selling before the deal is closed, you have a dead deal on your hands. Not only is this a red flag to begin with, but no bank will follow through on the loan unless this very important subject is discussed. A reluctant seller to tell the staff of the sale should result in the Business Broker asserting that it has to be done as soon as the buyer submits an offer to purchase. If the Business Broker waits too long after that point, he is just wasting everyone’s time hoping that the deal will close, and he will get paid. Its careless and its lazy. The staff should know, and the players of that business should be accounted for so you know who you will lose (if any) sooner, rather than later so you can re-adjust. If you lose a key employee over selling, that is something to consider. But far worse is to wait 2 months and go through a grueling underwriting process only to wait to tell your staff of which you should have done so right after (or before) the offer to purchase was submitted. If a buyer goes through all this, and the seller waits too long to tell the staff, please revert back to deal killer #3 TIME KILLS ALL DEALS. The buyer won’t want to start the process over again by going through numbers and trying to figure out if he can make it work after a staff disruption.
The above top 5 ways to not sell your Business are all common, and the most important factor as to weather they happen to you or not is dependent on who you choose to sell your Business. A GOOD Business Broker is a must. Contact Peterson Acquisitions for a free consultation and to understand the value of your Business, free of charge.