One of the major challenges faced by someone showing his or her business for sale in California is the appearance of people claiming to have the interest and the money to buy, but who actually are not qualified buyers. Because they waste so much of a seller's valuable time, and can compromise the selling effort by violating the non-disclosure rules, it's important that a seller avoid trying to work with these unqualified buyers. In order to do that, of course, it's necessary to know how to identify a time-waster, and to separate the unqualified from qualified buyers.
Surprisingly, some people make it a hobby to look at businesses offerings but with no intention of buying any business. They might ask intelligent questions, even show a financial statement that suggests they have the resources needed to make the purchase. And they often state an interest in making the purchase. But once bored with learning about one kind of business, the so-called buyer will start investigating something else. The seller who spent time, and opened his books to a pretend buyer will get nothing but a sense of confusion about why the buyer disappeared, and disappointment that no sale resulted from all of the time and effort.
More dangerous than phony business buyers are those who might like to purchase a business, but not at all the way the owner wants to sell it. These leverage artists and con men and women might go out of their way to impress and to charm a seller, perhaps take him out to dinner and repeatedly compliment him on the state of his business. But their real agenda has to do with striking a deal that enables them to "try out" or "lease" a business, or to purchase it with no money down. People like this may claim to be financially qualified, and in fact might have the cash needed to make the purchase, but their objective is to buy your business with your money.
Even experienced business sales intermediaries can be fooled from time to time by a time-waster who does a good job of acting like a real buyer. Still, there are some common things to look out for when showing the business. Identifying someone who is not a real and serious buyer when first meeting him or her can save a seller considerable time and aggravation.
Some ways that an unqualified business buyer might reveal that he or she is a phony, include:
1. Refusal to provide a financial statement and resume at, or prior to the first meeting. Or refusal to sign a non-disclosure before learning the identity of the business being offered.
Exchange of basic information is a standard practice in California when a business is being introduced to a prospective buyer, whether by a broker or the owner. That means the buyer learns the name and general information about the business, perhaps including some financial performance results, and the seller or licensed intermediary receives a signed disclosure form, personal financial statement and resume from the buyer. This exchange of information and documents usually takes place before any important discussion begins. Just as a buyer claims the right to see some information concerning the business about which he or she inquired, the seller has a right to know with whom he or she is dealing.
Refusal of a buyer to cooperate may take the form of an excuse such as "I won't disclose any information about myself unless I am interested in this business, so first, give me the details about what is for sale. If I'm interested in pursuing this further, I will supply personal information." Or words to that effect. This lack of cooperation with accepted practice is a warning that the buyer is not willing to play by the rules and may not be qualified to buy the business.
Another excuse: "Don't worry, I have plenty of money," might be acceptable if you recognize the interested party from photos you've seen of Bill Gates or Warren Buffet. Otherwise, you have no way of knowing whether the prospective buyer has any money to make the purchase. That's when the discussion should end.
Some sellers require a prospect to bring a letter from his or her bank's officer attesting to the fact that the individual has money in the bank. Such a letter should state the approximate value of the account, and point out how long the sum has been in the account. The reason for this requirement, obviously, is because a financial statement presented without verification that it is authentic could contain completely false and misleading information.
2. Questions about "alternative" ways of selling the business. A buyer might be open about her intentions and ask something like: "Have you considered leasing the business with an option to buy?" Or the questions and comments might be much more subtle such as a statement like: "This business will take a lot of cash to run. Maybe you should take a note for the full purchase price so a buyer can use his money to finance operations and growth." Another popular question is whether the seller is willing to co-sign with the buyer for the loan the buyer will need so he can give the seller a down payment.
An alternative way a buyer might approach this subject is by telling a story about a friend or acquaintance who, for example, bought a company in a "creative" way and made the business so successful that he could afford to pay the seller a bonus.
It's a good idea to be suspicious of any buyer who mentions a business transfer that does not correspond pretty closely to the asking price and deal structure presented by the seller.
3. Indications that a buyer is making false or misleading statements. In other words, catching the pretend buyer in a lie. A machine shop owner discussed his business with a prospect who claimed he was experienced in the industry. But the questions the buyer asked and the way he look puzzled when viewing the equipment, made it clear to the seller that this guy had no idea about the business. If the buyer tells you one lie, the chances are good that any statement about his or her interest in the business and willingness to observe guidelines suggested by your price and terms, is almost certainly a false statement.
Related to catching a buyer in a lie, is getting the "feeling" that a buyer is not what he pretends to be. Some individuals have a sixth sense about people and can usually tell when someone is not sincere or authentic. If you don't have that talent, watch closely for clues that the buyer is not who she or she represents. An ad agency professional shouldn't have dirty fingernails unless his hobby is rebuilding auto engines on weekends. The "buyer" who claims to have just sold a big business for a lot of money, is unlikely to pull up to the curb in a fourteen-year-old mid-priced sedan with a broken headlight and missing fender.
The seller of a business should make it the first priority to know with whom he or she is dealing before spending time and sharing proprietary information with a prospective buyer. The place to start is by observing these three suggestions. The consequences of lost time and heightened aggravation that results from dealing with unqualified people can discourage an owner from ever selling the business.
Contributor:
Cheryl's a restaurant business broker, over 25 years in the bar and restaurant industry coupled with a J.D. Cheryl works tirelessly to create successful strategies and effective negotiations for those who wish to purchase a new or sell an existing bar, restaurant, cafe, or night club. 415-309-2722
ServingCity Of San Francisco
I am an experienced entrepreneur, attorney, & business professor. I & my EvergreenGold® team offer business owners sound advice & expertise to build business value & achieve profitable sales. Call me today for a business evaluation & SWOT analysis for your business anywhere in the USA.
ServingNationwide
Laundry consulting, due diligence, buyer representation: We preview laundries for you and evaluate them. 28 years laundry industry experience: buying, selling, valuing, retooling, analyzing, consulting services for laundry buyers and entrepreneurs in California. Contact us today about our services.
ServingSouthern California
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.
ServingSan Francisco Bay Area, North Bay, Central Valley
I am the Founder Of BizBen.com. I consult daily with intermediaries, business buyers, owner/sellers & advisors daily about buying and selling California small to mid-sized businesses. Contact me today about joining & utilizing BizBen, consultations, & advisory services.
ServingNationwide - All Areas
If your business involves alcoholic beverage sales, we can help. Obtaining a liquor license transfer or selling a business with a license in California does not have to be a frustrating and overwhelming process. We have procured thousands of licenses for our clients.
ServingAll Of California
For over 25 years Peter Siegel, MBA has been providing niche business purchase financial advisory and loan placement services with SBA Loans, Non SBA Financing, Retirement Plan Conversions, Note Restructures, etc. Call me regarding business purchase financing and to get pre-qualified: 925-785-3118.
ServingNationwide - All Areas
The Veld Group provides a refreshing approach to Business Brokerage, Mergers & Acquisitions and Business Consulting and Valuations. From Your Street to Wall Street, we cater to Main Street Businesses as well as more complex Strategic Firms and Start-Ups.
ServingSouthern California
Financing a business purchase, or getting cash for a down payment can take many forms. Hopefully the options listed below will give you some ideas where you can find the money to buy a California business!
A potential small business owner/seller asks the question: I have a preschool and am thinking about selling it but my lease is ending soon. What would be the best thing to do? Do I renew the contract or do I act the landlord to sign a contract to the new buyer? and is it a good time to sell?
The likelihood of selling a business is often determined by external factors in the marketplace. Here are eight influences on how easy, or difficult it might be when selling a small business. Peter Siegel discusses these factors in a BizBen.com article.
One of the strategies for selling your business to a very cautious buyer is to relate the price to performance of the company in the months after the buyer takes over. Peter Siegel with BizBen.com explains this strategy.
Don't buy a laundry business before reading these 5 tips to maximize your investment. You'll soon be able to buy a laundry with confidence! Peter Siegel, MBA with BizBen.com discusses this topic.
The three most widely used sources of funds for financing business purchase assets are buyer's cash, seller financing, and SBA bank loans. Peter Siegel, MBA with BizBen.com and an SBA loan consultant & placement specialist explains the differences between them.
Before you buy a dry cleaners small business, read these critical tips about this industry. Discover why a dry cleaner needs to be "green" to be profitable. Peter Siegel, MBA (BizBen ProBuy, ProSell Program Advisor) explores this topic and other helpful strategies on buying a dry cleaning store.
Chuck Post, a leading laundry expert with over 37 years of developing laundries, retooling, and rebranding hundreds of existing laundries, tells investors how to search, find, evaluate, and do good laundry due diligence laundries for acquisition. A must read for new investors & current operators.
Chuck Post hosts these live FREE online webinars on Buying A Card or Coin Laundry. These webinars occur every Weds at Noon. Have your questions ready for an open and honest discussion about both the Pro & Cons of the Vended Laundry Business. RSVP or for more info phone Chuck at 619-227-5711 direct.
Coin operated laundry for sale (also referred to as a laundromat), which typically can yield a 20% to 30% profit (before taxes, interest, depreciation and amortization) on gross revenues to the owner. Peter Siegel, MBA with BizBen.com discusses this topic on buying small to mid-sized laundromats.
Utility rates are on the rise. I am getting calls from laundry owners complaining of the costs, asking for ideas. So what is the answer? What is the best approach in combating these costs? Chuck Post, laundry consultant discusses strategies for keeping coin laundry utility costs under control.
Laundry buyers and investors should expect both challenging times and opportunities for success in 2022 and 2023. Chuck Post, Laundry Industry Advisor explores growth opportunities, equipment advances, industry challenges and trends all laundromat buyers and investors should know about.
The laundry business offers all of those rewards of business ownership, with much fewer headaches than with most other businesses. However buyer beware - Chuck Post, laundry broker and consultant covers several mistakes many first time laundry buyers commit when buying a California laundromat.
When investing in a laundry business, there are two methods. One is preferred, but the other is far more common. If you are considering entering into a new industry, like most now entering the laundry industry, you want to have a good understanding of both opportunities. Chuck Post explores both.
Many Californians want to buy a coin laundry because it's a business that doesn't require full time owner attention and because, as an all cash business, the owner is always paid before the service is provided. But there are a few misconceptions about the business and a buyer should have the facts.
Laundromats and coin operated Laundromats are popular choices among business buyers as they often can be successfully run as an absentee run business. You need to be strategic about when you sell your Laundromat so you don't get taken to the cleaners by a buyer and so that you maximize your profits.
Are you thinking of selling your California vending route? More business buyers than ever before are looking to buy such a business. Peter Siegel, MBA with BizBen.com discusses tips for selling your vending route.
Buying a professional service business, like a dental practice, is one of the most profitable ventures you can enter into if you are considering becoming a small business owner. In this blog, Peter Siegel, MBA discusses six things you need to know about buying a successful dental practice or office.
Entrepreneurs who think they want to buy a towing business need to have some idea of what to look for when examining businesses for sale in this industry. The assets, including tow trucks and perhaps the property where towed vehicles are stored, determine much of the value of this kind of company.
Buying a day care for sale is a dream for many people. Here, you'll learn how to successfully negotiate the purchase of a day care for sale to make that dream a reality. Peter Siegel with BizBen.com covers this topic.
There are several things to consider when placing a value on a preschool. Businesses that are regarded as leading preschools in their area can go for premium prices so know what you have so a potential buyer can't take advantage of your lack of knowledge. Peter Siegel with BizBen.com explains.
If you are open to exploring the franchise opportunities available the commercial cleaning industry is an area you should consider. Commercial cleaning franchises are quickly becoming a popular choice among business buyers and here are my 6 reasons why you should consider buying one.
Buyers interested in buying a janitorial cleaning business will find companies in this industry for sale that are quite profitable. Careful due diligence, including the six factors covered in this blog post, is advised before completing a deal. Peter Siegel, MBA with BizBen explores this industry.
One of the most important steps in buying a business is doing your due diligence. When buying a California winery, there are three major areas to focus your attention during this period of research. Learn about these three factors in this BizBen blog post on wine industry due diligence for buyers.
A business buyer in the BizBen ProBuy Program asks how to handle the inventory amount in the purchase price of a business. Other questions answered in this article: Do you add the inventory value to the business value? Should the owner be expected to take back a note for the value of the inventory?
Trying to pick the best convenient stores for sale? Learn how to find convenient stores for sale with high traffic, profitable locations to maximize your investment. Peter Siegel Director of the ProBuy & ProSell Programs and BizBen Founder explores this issue regarding buying convenence stores.
Unlike many small businesses, due to strict regulations there are many steps that you must take before you can consider buying a liquor store. Peter Siegel with BizBen discusses the seven steps will put you on the right track to buy a liquor store legally.
Looking to buy a California gas station? Consider these five questions first before buying a gas station, saving lots of money & headaches. Peter Siegel, MBA and Founder of BizBen.com and BizBen's Top Advisor for the BizBen ProBuy and ProSell Programs discusses this topic of buying CA gas stations.
How does the laundromat business look as we enter this changing environment? Is it still as easy to operate a laundry and be profitable? Is it still the American Dream Business that it has been known to be? Yes, but… Chuck Post, Laundry Advisor & Consultant initiates this BizBen Discussion post.
We are finding that many laundry buyers and investors are not being given true light to selected elements of value or there are inconsistencies in the interpretation of these elements of value. This common error needs to be addressed. In this BizBen Discussion we address many of those factors.
Chuck Post a laundry consultant, specialty broker, buyer representative & due diligence advisor starts this discussion on why it's important to have an exit strategy in mind while buying a laundromat! He & others explain why this concept is so important for buyers especially in the laundry business.
However all the laundry listings are asking 4X to 5X multiple for an asking price! Is this reasonable, standard? We are are looking buy either a coin or a card laundry and want to pay a "fair" price. What factors go into valuing a laundry business these days? Multiple Advisors answer this question.
When buying an Elderly Care Home what should potential buyers always ask the broker or owner before proceeding? Find out in this Discussion on BizBen. Items buyers of elderly care homes will want to know more about why the seller is moving on, average length of stay, placement fees paid, etc.
A business buyer asks about the viability and purchase of a home health care service and about the future of this industry - Peter Siegel, MBA takes on this question with other ProIntermediaries & Advisors on BizBen regarding the home health care industry and it's future for potential buyers.
I would like to start this discussion and see what other BizBen Users feel about (and possible contribute to this list via a comment and replies below) what items/questions/information buyers should be thinking about during the due diligence and buying process of manufacturing related businesses.
Is a dog grooming business for you? Business broker Joe Ranieri ponders this question with BizBen viewers and answers this question along with other intermediaries and advisors. Some replies cover: brick and mortar vs. mobile, licenses & certifications, maintaining and growing a clientel, etc.
The only time to get an exact and accurate inventory count, and valuation, is at the time the business is being transferred. To do so beforehand, would mean that any merchandise sold after inventory is taken, but before close of escrow - Peter Siegel, MBA with BizBen & others discuss this topic.
Buying a liquor store can present some major challenges to business buyers - a recent client on the BizBen ProBuy Program relates to Peter Siegel, MBA what the major challenges may be when searching for and buying a Californa liquor store business. I welcome other Advisors to weigh in on this topic.
Buying a gas station can be a profitable business. From my experience, here are the pros & cons of buying a gas station that I share with BizBen ProBuy Buyers when they come to me to to get pre-qualified for financing to buy a gas station (with or without real estate). I discuss all these factors.
How much money should you expect to make when buying an automatic car wash? Peter Siegel, MBA (BizBen ProBuy Program Director and Business Purchase Financing Expert) explains with other brokers, intermediaries, and advisors info on this topic.
This is a hard question to answer specifically without any knowledge of the business. What kind of car wash it is (auto, self-serve, or full service)?, How many bays does the car wash have? Is there any other streams of revenue? We discuss this topic regarding car washes on this BizBen Discussion.
Before purchasing a car wash (quick serve or full serve) you must understand that the industry as a whole will provide you with plenty of competition. More importantly, depending on what your interests are, you will identify what type of car wash you want. We discuss this all in this Discussion.
Doing due diligence when buying any type of business is extremely important. Regardless of what type of business you are buying there are certain things you will always look at such as, financials, equipment, legal issues etc. We take a look at several angles for optimal gas station due diligence.
In this Discussion, we define financing options available to potential restaurant buyers when purchasing a small to mid-sized restaurant business (with or without real estate). When it comes to financing a restaurant purchase, potential restaurant buyers have several options to choose from.
Buying a small to mid-sized restaurant can have many pitfalls, and potential restaurant buyers should know how to avoid getting burned! Several restaurant advisors weigh in with (Peter Siegel, MBA at BizBen) and discuss tips for buying a restaurant in California.
Was chatting with a potential buyer of a restaurant in our BizBen ProBuy Program and he asked me what he should look for in due diligence when he finally did find a restaurant he was interested in. Peter Siegel, MBA with BizBen and others on BizBen explore this topic.
Ice cream shops are a favorite with buyers of small businesses, but many times don't know what to look for when seeking a purchase of a shop. Joe Ranieri and other intermediaries and advisors share their experience and expertise to potential ice cream shop owners. Explore these tips to learn more.
For those who don't know, a non-compete agreement is a contract between a buyer and seller of a business, which after the sale, prohibits the seller from engaging in direct competition with the business they previously sold. Joe Ranieri (Business Broker) adds this topic to a BizBen Discussion Post.
In our BizBen.com June 2021 Monthly Report the top ProIntermediaries and ProAdvisors on BizBen offer their thoughts about the current status of the business for sale marketplace with trends and predictions for Business Buyers, Owner/Sellers, Business Brokers, Agents, Advisors in the near future.
Sometimes business brokers just can't win with their clients, because if an offer comes in too fast & too early then they must have lowballed the price & the seller is suspicious, and if not enough offers come in after putting the business on the market - they may look unproductive to their clients.
As the year winds down, it's tempting for business brokers to go through their old files and throw them out to make room for new client's folders, but that would be foolish. Joe Ranieri (Orange County Business broker) discusses strategies for saving files - a key annual strategy for brokers/agents.
