Keith Kramer with
KSL Financial a business brokerage firm located in Southern California brings up a very important point that most buyers of small businesses don't address - the seller who isn't quite ready to sell and could possible pull out of a deal once it gets going.
Check out what Keith has to say on this situation . . .
"Each year, KSL Financial deals with thousands of Business Buyers, all looking for the perfect business opportunity. Unfortunately, all too often, they share similar experiences and frustrations in trying to buy a business. For the majority of these people, we hear the same story repeated constantly. They have been on the business hunt for 2 years or longer, however, their efforts are mostly rebuked. During their search, many have made offers, signed contracts, completed due diligence, spent money on professionals, etc. however they were not able to close escrow.
Serious Buyers can make all the right moves and take the advise of a listing Broker, but sometimes, its just not enough. Why?
It happens more than you might think. This can be due to a Seller who is not committed to selling their company. Even once an agreement is executed, a Seller may have a change of heart at any point in the sale process and try to find any reason or excuse to break a contract and retain ownership of their company. Just because a business may be represented by a Broker, doesn't mean to let your guard down. A Buyer should question the integrity and motives of the Seller directly. If something doesn't feel right, it may be an ominous sign of things to come. Take the time to get to know the Seller before you make an offer. Be certain that the Seller has a high commitment level to selling their company.
Sometimes a Seller jumps at the chance to make a large sum of money, take long vacations and play golf. However, sometimes reality sets in, when the Seller takes the time to consider what their life would be like without the business and the cash flow it produces. They can experience a change of heart. They believe that if they can sell their company for X dollars today, in 3 or 4 years, they might get X times 2. A Seller can also be influenced by a spouse or confidant after the fact and they realize they had a good thing going and maybe it's the wrong time to sell. Its unfortunate, but it happens and at no fault to the Buyer. As a result, the Buyer wasted months upon months.
One way to avoid this scenario happening to you, before you invest the time with a business opportunity, is to take the time to understand why an Owner wants to sell their company. Does his explanation make sense and appear credible? Does he appear sincere and genuine?
If a Broker is involved, observe the relationship between the Broker and Seller. Does the Broker have the confidence of the Seller? Does the Broker appear to have a keen understanding of the business they are representing and most important, does the Broker appear to have control over the sale process and the Seller? If not, that could be a problem. Before you invest a lot of time reviewing a business, find out what due diligence the Broker has done in regard to validating the Business and Seller in particular. If the Broker hasn't reviewed certain key financial information and documentation, that means the Broker has not done their homework and has taken the Seller at their word. Unfortunately, this can often lead to frustration and time wasted further down the process.
Remember, as a Buyer, you should always take the time to qualify a Seller, just as he is qualifying you. Don't forget to question the Broker to determine what steps he has taken to validate the information presented. If he doesn't appear to have a handle on the sale or the Seller's confidence, this may suggest they are not on the same page and there is a lower confidence in the quality of the business and a less likely hood of all the pieces falling into place within a reasonable time period."
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