It is staggering to me how so many business buyers simply miss the mark during the initial stages of the business for sale process and lose out on potential opportunities.
In prior posts I have alluded to the mix of emotion and logic when it comes to the decision-making process and how one needs a healthy combination of both to sustain the effort and ultimately get a deal closed when buying a business. What
I find perplexing still is the number of prospective business buyers who simply do not factor in the human element to these discussions.
This issue surfaces when typically inexperienced buyers think it is advantageous to adopt a demanding attitude when dealing with sellers.
This take charge philosophy can often lead down the path to nowhere; also known as failure.
While I am a huge believer that whichever side takes charge of the deal usually wins out, that is significantly different from being a bully in this transaction. Buyers must be sensitive to a seller’s concerns just as a good seller understands what worries a buyer. Think about this as a dating process. You do not go on a first date with a pre-nuptial agreement handy and ready to buy furniture together. Long-term relationships grow over time as the parties get to know one another – that is pretty basic “Dating 101” stuff. The same holds true for the business buying process.
Successful buyers understand how to read the seller, to discover their hot buttons, to effectively analyze the business even with limited initial information.
They utilize probing questions to extract information and all the while paying attention to building a solid relationship with the seller and their representatives. Surely there are times one must be forceful, but you cannot come out of the gate like a raging bull.
Initially, all a buyer should do is sign the Non Disclosure form and review whatever information the seller provides. Conducting independent analysis of the numbers and the marketplace can easily be done as well.
Meeting with the seller to ask some probing yet general questions is always suggested, but it is the time to also begin the “dating process”. You want to impress them enough so they will go out a second time with you – to continue the dialogue and for them to feel that you may be a qualified candidate to acquire the business.
Allow the situation to unfold naturally. If you are demanding in your attitude, you will not get to second base. A case in point is a seller who contacted me recently who was approached by a prospective buyer who seemed genuine and interested according to the seller. Unfortunately, the buyer is driving the seller completely crazy just trying to get a standard non disclosure document executed. The buyer’s inexperience is obvious and the seller, who was initially impressed with the buyer, told me “if it is this hard to get him to agree to this document how are we ever going to get a purchase done?” I cannot argue with that logic at all.
Remember, this whole process includes several steps and an ongoing discussion and negotiation is an integral part of the process. It is okay to be tough when structuring a deal, but choose your battles wisely. Do not expect any seller to simply give you complete and open access to their financials, employees, suppliers or location. It takes time to gain credibility in any relationship and it is much easier to destroy trust than it is to establish it.
Savvy business buyers know how to take their time without wasting it, and quite often these deals proceed slower than one would have thought. The key is to really know who is on the other side of the table and what makes them tick.
As I have stated before, if the buyer wants to buy and the seller wants to sell, and the parties trust each other, there is no stopping them from getting a deal done.
Have a great week!