As mentioned in part I of this series, the business broker has to do a great deal of homework to prepare a business for a successful sale. It is the business broker who has the responsibility, on behalf of the purchaser and vendor, to examine financials, client lists, existing account and competition, among other factors and to make the purchaser aware of these potential pitfalls before entering negotiations. Moving forward, it’s important to keep in mind these tips before re-entering the sale or buying process once more.
Don’t Get Bogged Down in Regret
While it can be easy to blame individual parties when a sale or offer falls over, realising and accepting that these things happen sometimes is part of the buying and selling process. Deals don’t always work out for a myriad of reasons and getting lost in regret doesn’t help the business broker, seller or buyer move forward.
Due Diligence
For a sale to be successful, the business broker has to engage in appropriate due diligence and make their client aware of the pitfalls they find. Even when thorough research and investigation were completed the first time around, things may have been missed that contributed to the deal’s collapse. Going back and looking over what went wrong during the due diligence process helps everyone move forward with new information. Buyers and sellers have to be honest and aware of red flags that could potentially alter the terms of the deal.
Due diligence is a major reason why business sales and offers fall over and many times it happens because the purchaser (or business broker representing them) uncovers an issue that the vendor did not disclose. This shatters any trust that may have been established between buyers and sellers beforehand. While the vendor shouldn’t go to great lengths to expose every little negative detail about potential pitfalls because, after all, the goal is to sell the business, they do need to expose the good with the bad so the purchaser and business broker are properly informed.
For example, a seller might be worried because the success of their business relies on just a few suppliers. This could be a red flag for a buyer. To mitigate the negatives associated with such a set-up, the vendor can provide a list of potential future suppliers that they have plans to contact or make agreements with that the new owner could then use when they take ownership.
Step Back and Take a Realistic Look at What Failed
A business broker can assist with this process and help the buyer or seller understand what parts of the deal went sour. Once the issue is pinpointed, it can be addressed and fixed so that when a new offer arises, hopefully it ends in a different outcome.
More than likely, it will have failed because of lack of due diligence on the part of the purchaser, vendor or business broker. If not enough information was gathered about the business, including its current financial state, the current condition of the market, stocks and client lists, then these factors need to be revisited and investigated in order to move forward.
Hire a Business Broker If You Haven’t Already
A business broker provides valuable assistance for a vendor or purchaser during these sale transactions. They can complete most of the legwork involved with researching competition, assembling financial records and calculating an appropriate selling price or offer for purchasing the business. This way, business owners and interested buyers can focus on operating their current businesses and ensuring day-to-day operations proceed smoothly while negotiations are occurring.
By taking these steps after the sale or offer of a business has fallen through, sellers and buyers can try again to complete a sale with more success having learned from the first experience.
For further information about this article, contact your nearest LINK Business Broking office at:
