There’s a major difference regarding timelines when buying a business versus a real estate transaction. In a typical real estate deal, there are hard deadlines set by lenders, closing agents, buyers (who may be vacating a current house) and sellers (who may be using the proceeds on another property). In a business sale however, deadlines are more guideline oriented for the parties rather than drop dead type dates.
There are both positives and negatives to this lack of formal timelines. On the one hand, not having hard dates allows the parties to progress without a gun to their head. On the other hand, it can be an invitation for the parties to drag their feet.
Despite the lack of regimented dates, in my experience, it’s very important for the parties, and specifically the buyer, to set firm milestones both in the initial stages of buying a business and once a deal is in the works.
It’s very easy to turn the entire journey of buying a business into an endless search process and that’s specifically what many prospective buyers do. The result is usually a lot of wasted time and no deal. As such, while you don’t want to be reckless, set a timeline to find a business. In my experience, the business buying process shouldn’t take more than six months – maximum. As a guide, use 4 months to find the right business and 60 days to close the deal.
Once you get into a dialogue with the selling party, set timelines at every step for getting information, conducting site visits, targeting closing dates, etc. Doing this from the beginning sets a very good tone with the other parties and lets them know you’re a serious buyer with a sense of urgency.
You will deal with various personalities throughout the buying process – sellers, brokers, accountants and attorneys – on both sides of the deal. Plus, there can be bankers involved (those folks rarely work with any urgency). Unless someone takes the lead and mandates targeted dates for each of these parties to complete their work, you can wind up chasing a lot of people and again, wasting a ton of time. I find it very helpful to always ask the other party, “When do you expect to have xyz done?” for any work they’re doing or answers they’ll be providing. Doing so obligates them, even if informally, to completing their work with a target date. This is especially important when dealing with attorneys and accountants.
Some people may find themselves intimidated and afraid to dictate to the other parties involved – nonsense! You do not need to be experienced to be organized or to convey a sense of urgency. At every point in the business buying process you have to assert your influence and get all the parties to subscribe to your timeline. This can be done in a very polite way. However, if any of the parties drag their feet, make it abundantly clear that you expect them to conduct themselves with the same urgency as you are devoting to the deal. Remember, sellers want to sell, brokers and bankers want to close the deal, and accountants and attorneys want to complete the file and get paid, but sometimes, it takes the buyer to aggressively yet effectively light a fire under their butts.