A “Pig in a Poke"

Once a buyer has negotiated a deal and secured the necessary financing, he or she is ready for the due diligence phase of the sale. The serious buyer will have retained an accounting firm to verify inventory, accounts receivable and payables; and retained a law firm to deal with the legalities of the sale. What’s left for the buyer to do is to make sure that there are no “skeletons in the closet,” so he or she is not buying the proverbial “pig in a poke.” The four main areas of concern are: business' finances, management, buyer's finances, and marketing. Buyers are usually at a disadvantage as they may not know the real reason the business is for sale. This is especially true for buyers purchasing a business in an industry they are not familiar with. The seller, because of his or her experience in a specific industry, has probably developed a “sixth sense” of when the business has peaked or is “heading south.” The buyer has to perform the due diligence necessary to smoke out the … [Read more...]

Rating Today’s Business Buyers

Once the decision to sell has been made, the business owner should be aware of the variety of possible business buyers. Just as small business itself has become more sophisticated, the people interested in buying them have also become more divergent and complex. The following are some of today's most active categories of business buyers: Family Members Members of the seller's own family form a traditional category of business buyer: tried but not always "true." The notion of a family member taking over is amenable to many of the parties involved because they envision continuity, seeing that as a prime advantage. And it can be, given that the family member treats the role as something akin to a hierarchical responsibility. This can mean years of planning and diligent preparation, involving all or many members of the family in deciding who will be the "heir to the throne." If this has been done, the family member may be the best type of buyer. Too often, however, the difficulty … [Read more...]

Today’s Business Buyer: A Profile

Today's independent business marketplace attracts a wide variety of buyers eager for a piece of ownership action. Buyers of small businesses are most likely replacing lost jobs or searching for a happier alternative to corporate life. Buyers of mid-sized and large operations are, typically, private investment companies seeking businesses to build and eventually sell for a profit. This is the broadest possible look at the types of buyers out there. Business owners considering putting their business on the market should be aware of the finer "distinctions" among buyers, as well as what they are looking to buy, and why. 1. Individual Buyer This is typically an individual with substantial financial resources and with the type of background or experience necessary for leading a particular operation. The individual buyer usually seeks a business that is financially healthy, indicating a sound return on the investment of both time and money. If these buyers do not have the amount of … [Read more...]

Buying (or Selling) a Business

The following is some basic information for anyone considering buying a business. There may also be interest to anyone thinking of selling their business. The process becomes easier the more information and knowledge both parties have about the buying and selling a business. A Buyer Profile Below is a glance at the make-up of the average individual Buyer that’s looking to replace their job or escaping a troublesome job situation. Most likely the individual is a male (in introspect; more women are coming into the business industry for themselves that is rapidly changing through time). Primarily about 50% of these Buyers have less than $100,000 to invest into buying a business. While more than 70% will have roughly $250,000 or less to invest. In various cases the funds, or part of them, will be from their personal savings account along with financial assistance from other family members. In most cases, he or she has never owned a business previously. Despite what the Buyer wants … [Read more...]

Why Do Deals Fall Apart?

In various cases, the Buyer and Seller reach a tentative agreement on selling or buying a business, only to have it fall apart. While there are countless reasons this happens, and once those elements are understood, majority of the worst “deal-smashers” can be avoided. The key word is, “Understanding”. Both parties precondition themselves to develop an awareness of what the sale involves-and such awareness should include dealing with potential issues before the issues become too large and “sink” the sale of the business. What prevents a sale from closing successfully? A study of business brokers all across the United States showed many similar reasons that were cited often that a pattern of causality began to surface. Below the following, there’s an assortment of scenarios and factors each affecting selling the business. The Seller Fails to Reveal Problems During the times a Seller isn’t up-front about certain issues of their business, this doesn’t equate to the problems of … [Read more...]