Back-Up Offers: Crucial When Buying Or Selling A Small Business


Back Up Offers When Buying Or Selling A Business

An often overlooked aspect of selling (or buying) a small business is taking back-up offers during the entire process of selling (or buying) a business. Most sellers (or buyers) don't realize that over fifty percent of all deals/contracts fall out for one reason or another when selling/buying a small business - could be a landlord issue, business purchase financing falls out at the last minute, or plain and simple either the buyer or seller gets cold feet.

In all of my online webinars, daily ProSell/ProBuy/ProIntermediary consultations, weekly Friday morning online sessions on BizBen's "Office Hours" and consultations with brokers, agents, owner/sellers and business buyers I emphasise not only the importance of taking back-up offers to sellers but also (for business buyers) writing back-up offers on existing businesses in contract - even if they (sellers) are far along in the process - only because I have seen so many deals fall apart for in the last stages due to so many different reasons (see the most common reasons below - Other Reasons Why Deals "In Play" Fall Out Over 50% Of The Time).

In fact in most instances I encourage business buyers to write multiple back up offers on multiple small businesses being sold - if they are truly interested/serious in pursuing a small business purchase. The reason for this is that many business brokers and agents these days don't get financials and/or recent business tax returns up front from their seller clients and then post their client's listing for sale without confirming key/critical financial data - important data to make an informative decision if the small business being sold/purchased is priced fairly and the deal structure makes sense. At this time, this is the number one reason deals fall out of escrow and during contract.

Other Reasons Why Deals "In Play" Fall Out Over 50% Of The Time:

- Partners Or Advisors/Consultants Weigh In - Not Positively On The Deal
- Landlord Problems - Rent Increase, Selling The Building, Etc.
- Last Minute Coldfeet By Either The Seller Or Buyer
- SBA Financing Or Business Purchase Financing Drags Out Or Falls Through
- Negative Or Unexplained Data In Phase l and/or Phase ll Due Diligence Feedback/Updates/Revisions
- Unexplained Material Changes (Usually Financial) With The Business Being Purchased
- Personal Changes With Either The Seller Or Buyer - Health Issues, Financial, Marital
- Key Employees Or Manager(s) Decide To Leave Due To The Sale Of The Business

Again, when selling a small business ALWAYS encourage back-up offers from potential buyers up until your deal closes and you have the closing check from the escrow/bulk sale service. With this strategy sellers can keep buyers on a "tight leash" during the deal process and if buyer "A" happens to back out or takes too long to produce documents or potential financing the seller can move on to buyer "B" or "C".  When seeking to purchase a business don't be timid about submitting multiple back-up offers on multiple deals - one of them is bound to open up to other potential buyers!

Important point: Don't burn bridges with brokers and agents - make sure you keep them aware of any updates on any offers on any deals moving forward if they start getting serious and you are "promoted" to a lead buyer. If you end up buying one of the businesses you have an offer on - make sure you contact all brokers, agents, sellers and let them know you are now not a contender on their deal (back-up offer - or future deals).

If all sellers and buyers used these back-up offer strategies we would have a higher success rate of small businesses being sold and a much more efficient marketplace for both sellers and buyers of small businesses!

Do you need assistance with buying or selling a California small to medium sized business? Need a referral? Some advise? Call me about your situation - I can be reached direct at 925-785-3118 at BizBen.com

 
 
 

Categories: BizBen Blog Contributor, Buying A Business, Deal And Escrow Issues, How To Buy A Business, How To Sell A Business, Selling A Business

Contributor:

Peter Siegel, MBA
Areas Served: All Of California
Phone:  925-785-3118 Cell, 925-785-3118 Text
Founder Of BizBen.com (since 1994). I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I consult daily with buyers, sellers, and brokers daily about buying and selling California small to mid-sized businesses. Call 925-785-3118.





  Helpful Resources To Assist In Selling And Buying California Businesses
Helen Yoo, New Century Escrow - Escrow Services In Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Brad Steinberg, Business Broker: Laundromat Specialist

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

Elizabeth McGovern: Escrow Services - San Francisco Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.


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