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4 Reasons Why Offers and Business Sales Fall Over - Part I
Buying and selling businesses is a complex and often lengthy process. Business brokerages, like LINK, exist to help companies navigate the uncertain waters of the buying and selling process. While many sales are successful, sometimes initial offers for purchase fall over or the deal falls through further along in the process. It’s important for business owners to prepare for that possibility and while these reasons are often complex and unpredictable, understanding them can serve as a learning experience.
Lack of Preparation
In order for a business to be sale-ready, the participating broker needs to examine several areas of the business closely, including:
- Accounts and financials
- Client lists and existing contracts
- Employees and their current roles
- Existing supply agreements
- Lease details
- Current competition within the market
- Risk analysis.
With insufficient or incomplete information from any of these areas, the sale has the potential to fall over. This would result in the company and the broker return to the drawing board to assess what gaps need to be filled in to make proceeding possible.
To do this successfully, the broker needs to interact with the vendor, accountants, financial advisors and the landlord involved with their client’s business. They must communicate effectively with all parties involved to gather the most accurate information possible.
Seller Fails to Reveal Problems
When a seller isn’t upfront about the problems of a business, they’re bound to come up later; sometimes during the negotiation process or after a tentative agreement has been reached. When the problems do come to the surface, the buyer may get cold feet and back out of the deal.
For business sales to be successful, the seller has to be as open about the negative aspects as they are about the positive. LINK business brokers can handle these problems and manage them, as long as they are aware of them at the start of the buying and selling process.
Buyer and Seller Both Grow Impatient
Buying and selling is a lengthy process that involves supplying comprehensive information on both sides. In these scenarios, the buyer continues to want increasing volumes of information and the seller grows tired of having to supply it. This is why it’s beneficial for either the buyer or seller to use a business broker. A business broker can handle the nitty-gritty of the negotiations and supply the information that the seller and buyer need, so the client can concentrate on the day-to-day operation of any existing business.
The Seller Realises They Really Don’t Want to Sell
Sometimes the idea of selling can seem enticing at the outset, but now that the sale is nearing its end, the vendor decides to step out of the deal because they realise they aren’t interested in selling the business at all. If a business is a seller’s life’s work, emotional ramifications play a role as well and this can ultimately be what causes the seller to renege on a temporary deal or agreement. Experienced business brokers will typically be able to tell the difference between a vendor who is toying with the idea of selling as opposed to someone who is genuinely serious.
While other factors contribute to a potential sale falling apart, the above-mentioned points are crucial to address and understand before moving forward with negotiations. Understanding potential pitfalls before they happen put everyone involved — the buyer, seller and business broker — in a more logical place. Read on in Part II to find out how to address these pitfalls so a successful sale can be achieved under different circumstances.
For further information about this article, contact your nearest LINK Business Broking office at: