If you seek companies to purchase, beware of business owners
who will use you for the sole purpose of determining “what the
market will bare” for their companies.
Assuming you have clearly defined your business purchase
criteria and you have decided to pursue purchase of existing
companies, either officially “for sale” or not, you need to
think about how best to qualify a business owner’s selling
intentions as quickly and effectively as possible.
After you have started your program to find companies to
purchase you will find that sometimes the line between a
company being “for sale” and one that is not blurs very
quickly. Often companies that are for sale are listed at
unreasonable terms because the business owner is just tying to
determine what the market will bare for his company. Likewise,
a company that is not for sale, that you approach, may only be
interested in determining what the business might be worth.
These situations are common to the business buyer and can be
very expensive relative to time and money opportunity costs.
Determining whether a business is really for sale can be very
challenging and fraught with financial and emotional peril for
the business buyer. The time and money that can be invested in
a potential “deal” that never was really a deal to be had,
because the business owner never could or would make a
decision to sell, can be devastating. Although you can chalk
the purchase opportunity up as a “learning experience”, you
quickly determine that as a business buyer you cannot afford
to have this happen again.
As a business buyer you want to use the best means possible to
position yourself to get first shot at your most viable
acquisition candidates and quickly qualify the sincere
intentions of the current business owners.
FOR SALE or Not?
An established business that is officially “for sale” requires
less effort to find and offers the business buyer more avenues
to qualify their owner’s sale intentions. The process of
pursuing a business that is for sale is “reactive” in nature
versus pursuing a company not for sale is a “proactive” effort
requiring aggressive and creative approach tactics.
Responding to a business-for-sale listing is much easier than
trying whatever creative means you can to get to a qualified
business owner who can and will make a sale commitment. It is
also fair to conclude that business owners with a “proclaimed”
intention to sell are much more cooperative and motivated to
“show all their cards” than a business owner with no evident
reason or motivation to sell.
Information flow is quicker, is much more straightforward and
is supported by more detail from business owners with their
companies officially for sale than with owners of non-listed
companies. The process of determining if a business owner is
sincerely motivated to sell can be fairly simple with the
right approach.
How to “Reveal” an Insincere Business Seller
Qualifying a business owner’s sincere intention to sell the
company is basically a DIS-qualification process made up of
two fundamental steps: 1) Securing an “up-front sell
commitment” and 2) Asking a series of practical DIS-
qualification questions.
Besides effectively evaluating the viability of the answers
rendered to the questions asked, correctly analyzing how they
are communicated can be most enlightening to the potential
business buyer. The seller’s exhibited level of sincerity,
emotion and associated body language during the discussion
can be very revealing.
Before we define the questions to be used, be sure to
incorporate these fundamentals into your business seller DIS-
qualification process:
Secure a face-to-face meeting with ONLY, and ALL the current
business owner(s) as early in the business evaluation process
as possible Ideally, have this meeting take place in a
“neutral” location accommodating friendly, private discussion.
Be sure to bring along other members of your “buyer team” to
get second opinion’s and perspective’s on the to-be-had
conversation.
Take copious notes on all the questions asked and all answers
given.
Start the meeting by securing an “up front sell commitment”
from the seller … use these exact words:
“We are very serious about the purchase of your company. The
purpose of this meeting is to have you help us clearly
understand WHY you want to sell your company, and if we can
eventually come to mutually agreeable purchase terms, to
secure your commitment to sell the company to us. Before we
BOTH invest many hours and dollars into this potential
transaction, can you now agree to this?”
If you get a “no” or some non-commitment like response, with
little valid reason why, you are talking to a business owner
who has no compelling reason to sell. There is strong
justification that any time and money put into qualifying this
investment will be lost to seller indecision and/or lack of
straight forward seller communication.
Five “Must” DIS-qualification Questions to Ask
These five questions can give you further insight to justifying
your continued pursuit of the company or not, (Remember, “It
never hurts to ask” and a question not asked could cost you
dearly later):
1) “How long has your business been for sale?”
2) “Prior to this, have you attempted to sell the business
before?”
3) If yes…”Why didn’t it sell?”
4) “Have you ever declined any written letter of intent to
purchase?”
5) If so, “Why?”
Success in purchasing a viable company does not always depend
on being in the right place at the right time. It usually
depends upon being ready and able to effectively define
extraordinary opportunities from those that really are not.
Seller assessment is a critical process in the business
buyer’s ongoing attempt to reduce their “buyer beware”
disadvantage of finding the best acquisition possible.
About the Author:
Mark Smock is President of
,
the FIRST international business buyer directory of its kind.
Business Buyer Directory provides a non-traditional means for
proactive business buyers to locate businesses for sale
worldwide that meet their exact registered purchase criteria.
