Recent blog posts elicited some very interesting comments as I have been touching upon the current market to buy a business. Besides the usual concerns expressed by buyers, brokers and sellers about the economy’s overall impact on the business for sale arena, one thing has not changed – only a motivated seller and a serious buyer will get a deal done – good times or bad.

Many business owners dream of the day that they will sell their business and often, they are delusional in thinking somebody will walk through the door with boatloads of cash and make them an offer they cannot refuse.

While we read about inflated purchase prices amongst public companies or sometimes with strategic acquisitions by major corporations, the fact remains that rarely will anyone overpay for a business and so, it reverts to a business owner who is truly motivated to sell and a buyer who is absolutely committed to making a purchase to get a deal done.

From a buyer’s perspective, I have always found it effective to ask a seller a simple question: “If your business does not sell what are you going to do?” Obviously, they do not want to play their hand and tell you that they will sell at all costs, but a motivated seller will couch their reply with a telling answer such as being fully committed to sell, they have set plans in place post-sale and that they will make a deal happen with the right buyer.

This does not mean they will give their business away, offer dream terms or accept a grossly reduced price. However, it does convey they are committed to selling and will work with the right buyer.

Understanding how long a business has been for sale, how many offers has the seller received, why past offers have not crystallized into a deal are all reasonable questions to ask.

In other words, a buyer wants to work towards understanding what it will take to get the deal done. There is no need to waste time with ancillary discussions. Once a buyer feels the business is of true interest, engage the seller in the core issues of the business and the deal terms.

Far too often the parties involved with a potential business sale think that they have to be overly cagey in their approach and especially on the sell side by adopting a strategy of just doling out enough information to tease a buyer. Or, by using the overused and ill-fated approach of “make an offer and we will get you the information.” That tactic is antiquated and useless in most cases and while its origin is to eliminate the “tire-kickers”, it does not make sense in my opinion, but, it is understandable from a perspective of not wasting time since the goal is always to align a serious buyer and seller and get them to the finish line.

On the flip-side,

there is nothing wrong with sellers requesting detailed financial information from a buyer to determine if and how they can get a deal done and surely, a buyer cannot be taken back by this request in light of them wanting the seller to provide ample information to effectively analyze the business.

When all is said and done however,

the single most effective mechanism a buyer has to gauge a seller’s level of motivation is to make an offer.

Certainly, one needs adequate information to do so, but it does not have to be all-inclusive. More data can get gathered during due diligence. If an offer is made that is at all reasonable, a motivated seller will counter and crank up the negotiations.

Conversely, if they do not respond promptly, even if it is an outright refusal, it is generally a sign that they are really not prepared to engage in the selling process; they are not motivated. As a serious buyer, isolating the truly motivated sellers is fundamental to the business buying process.

Just as the market is flooded with “lookers” on the buy side, so too is the market overwhelmed with “testers” on the sell side

. Those are the business owners who are breathing oxygen from another planet as it relates to what their business is worth, and for many, their companies are not sellable at all. Buyers will never convince someone to sell a business if they do not intend to and so it is imperative that the buyer take the cues that a seller provides, and if they send out signals that dictate they are not sincere about selling then it is time to move on.

Have a wonderful Thanksgiving holiday.