Eric was understandably upset when he learned the
bar for sale he had been looking at as a possible acquisition was sold for the price he thought it was worth--a price he could have offered, but didn't think the seller would accept.
That was his lesson in the importance of making an offer.
The assumption that the seller will be offended and refuse to deal further--that was the erroneous idea in Eric's mind--is just one of the reasons that the majority of prospective buyers of small California businesses never get around to making offers on businesses, even companies that interest them and meet their criteria.
In fact, our studies indicate that 80% of people who say they want to
purchase a small business in California never actually complete a deal. Most of those don't even--in the words of one business broker: "pull the trigger" on a business they've been investigating.
And considering that sellers and their brokers spend most of their time with people who are not serious, it's no wonder that sellers are in no hurry to supply information requested by buyer prospects, and that brokers aren't always good about returning "buyer" phone calls.
TO BE TAKEN SERIOUSLY
Want to get their attention?
If a business interests you, if you can see yourself as the owner of the company you've been looking at, the next step is to make an offer. Put it in writing.
Buyers who sign a purchase/sale proposal and hand over a deposit check distinguish themselves, immediately, as "real" buyers. By stating your intent to buy a company according to certain terms, even if those terms don't match those requested by the seller, you elevate yourself above the crowd, joining the 20% of the buyer prospects with whom brokers and sellers of small California businesses want to be engaged.
Making an offer shows you are serious. And it means you'll be taken seriously in the marketplace of
businesses for sale.
BREAK THE ICE
Reviewing the details of a business for sale listing is helpful, as it informs buyer prospects about what the seller has stated regarding what he or she wants in a deal. But that's all. Is the seller more interested in total selling price or cash up front? Is there flexibility regarding seller financing? How firm is the seller about the way the purchase price is allocated among various assets?
A buyer prospect can speculate about these matters and discuss them with the
business broker at great length. But the way to find out exactly where the seller stands on these issues is to "break the ice" by making an offer, getting the "dialogue" started and, perhaps, getting the seller's agreement or counter-offer.
It may take some courage to actually sign on the dotted line and hand over a deposit check. As one buyer puts it: "You suddenly realize that if the seller says 'yes' to what you offered, you may have bought yourself a business. It's a little scary."
The good news is that it gets easier.
Over the six months following his disappointing experience, Eric made offers on four other bars that were for sale.
The first three offers were not successful, as Eric and the sellers were not able to come to agreement. But he felt that nothing was lost by trying, and as a result of these efforts, Eric became much more comfortable with the process of making an offer and negotiating terms.
The fourth time he made an offer on a bar, Eric knew just what he wanted to ask for, and he knew how to interpret the counteroffer. And after a bit of negotiating, he and the seller came to an agreement.
Eric likes his new business and is glad he learned to overcome his initial fears and make an offer.
See all contributions from Peter Siegel
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