There are a myriad of reasons why the sale of a business doesn’t close successfully; these multiple causes can, however, be broken down into four categories: those caused by the seller, those caused by the buyer, those that just happen (“acts of fate”), and those caused by third parties. The following examines the part each of these components can play in contributing to the wrecked deal:
1. In some instances, the seller doesn’t have a valid reason for entering into the sale process. Without a strong reason for selling, he or she has neither the willingness to negotiate nor the flexibility to see the sale to a conclusion. Without such a commitment, the desire to sell is not powerful enough to overcome the many complexities necessary to finalize the sales process.
2. Some sellers are merely testing the waters. As detailed above, they are not at that “hungry” stage that provides the push toward a successful transaction. These sellers merely want to see if anyone wants to buy their business at the price they would like to receive.
3. Many sellers are unrealistic about the price they want for their business. They may be sincere about wanting to sell, but they are unable to be realistic about how the marketplace will value the business. The demand for their business may not be there.
4. Some sellers fail to be honest about their business or its situation. They may be hiding the fact that new competition is entering the market, that the business has serious problems or some other reason the business is not salable under existing circumstances. Even worse, some sellers do not disclose that there is more than one owner and that they are not all in agreement about selling the business.
5. A seller may decide to wait until a buyer is found and then check with their outside advisors about the tax and/or legal consequences. At this point, the terms of the deal have to be altered, and the buyer won’t agree. Sellers should deal with these complications ahead of time. Nobody likes changes–especially buyers!
1. The buyer may not have an urgent need or a strong desire to go into business. In many cases the buyer may begin with positive intentions, but then doesn’t have the courage to make “the leap of faith” necessary to go through with the sale.
2 Some buyers, like sellers, have very unrealistic expectations regarding the price of businesses. They are also uneducated about the nature of small business in general.
3. Many buyers are not willing to put in the hours or do the type of work necessary to operate a business successfully.
4. Buyers can be influenced by others who are opposed to the purchase of a business. Many people don’t or can’t understand the need to be “your own boss.”
Acts of Fate
These are the situations that “just happen,” causing deals to fall through. Even considering the strong hand of fate, many of these situations could have been prevented.
1. A buyer’s investigation reveals some unmentioned or unknown problem, such as an environmental situation. Or, perhaps there are financial deficiencies discovered by the buyer. Unfortunately, these should have been on the table from the beginning of the selling process.
2. The seller may not be able to substantiate, at least to the buyer’s satisfaction, the earnings of the business.
3. Problems may arise, unknown to both the seller and the buyer, with federal, state, or local governmental agencies.
1. Landlords may become difficult about transferring the lease or granting a new one.
2. Buyers and/or sellers may receive overly-aggressive advice from outside advisors, usually attorneys. Attorneys, in their zeal to represent their clients, forget that the goal is to put the deal together. In some cases, they erect so many roadblocks that the deal can only fall apart.
Most of the problems outlined here could have been resolved before the selling process was too far advanced. There are also some problems that could not have been avoided–people do sometimes enter situations with the best of intentions only to find out that this is not the right answer for them after all. These are the exceptions, however. Most business sales can have happy endings if potential difficulties are handled at the appropriate time.
Business brokers are aware of the various ways a deal may fall through. They are experienced in resolving issues before the business goes onto the market or before a buyer is introduced to the business. To buy or sell a business successfully, sellers should resolve any potential deal-wreckers, following the advice of a professional business broker.
Although business brokers cannot provide legal advice, they are familiar with the intricacies of the business sale. They are also familiar with local attorneys who specialize in the details of these transactions. These attorneys will usually be more efficient, and therefore more cost-effective, than the attorney who handles a general practice.Read More
Do you spend hours working on things that do not help you reach your business goals? Would you like to be in business 10 years from now? Then listen to what Networking Guru James Barber’s told GABB on effective networking practices.
Mr. Barber, author of the Networking Guru, Traits of Champion Networkers, spoke to the Georgia Association of Business Brokers, the state’s only association of professionals devoted to buying and selling businesses, on Tuesday, Nov. 27.
View Mr. Barber’s presentation here.
Hear what he had to say here.
In a brief presentation to the Gwinnett Chamber of Commerce, Barber noted that 80 percent of businesses fail within five years, 90 percent fail within 5-10 years, and only 2 of 100 make it past 10 years.
“If you are in business, even if you feel like you do not have the perfect situation, put your best plan in place and operate according to the plan,” he writes. “I have seen people who want to wait until XYZ takes place before they will do anything.
“My friend, Dr. Ivan Misner says it best, ‘Ignorance on fire is better than knowledge on ice.’ ”
Mr. Barber is a motivational speaker and best-selling author. He loves people and is passionate about helping business owners. Through motivational and keynote speeches, training and writing books, he hopes to make a lasting impression on the lives of those with whom he is privileged to work.
He has been a Gwinnett Chamber Ambassador for a decade, and was named Small Business of the month by the Gwinnett Chamber twice. For ten years, he served as a Business Network International director and area director. With his wife, Brenda, he owns ICN Publications, Training of Champions and has a part ownership of High Achievers .
In addition to his networking book, he is the author of The Next Level, published in January 2017, and his third book, Dominating Your Market, will be published in 2019. He served in the Navy on the USS Georgia.
The GABB is composed of professionals who work with owners of Georgia businesses. Many of today’s business buyers are individuals who have decided not to re-enter corporate America, but are ready to control their own destiny by purchasing and operating a Georgia business.
For more information about the GABB, contact GABB President Mike Ramatowski at 770-634-0428 or firstname.lastname@example.org call Diane Loupe at 404-374-3990 or email email@example.com.Read More