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What Should I Do If Other Buyers Are Trying To Buy The Same Business?



Posted By: Peter Siegel MBA: BizBen Founder, Lead Advisor.   Buying a small business is hard enough when there is no competition, so how might a buyer navigate the process when there is additional competition from other buyers? Peter Siegel, MBA (BizBen ProBuy Program) and others explain a few of the ways that a buyer can beat out other buyers.

When attempting to purchase a business, it is important to understand that you likely aren t alone. In many cases, there are a number of potential buyers lining up for the chance to acquire a successful business, which can make the process nerve-racking for the average buyer. Buyers must prepare for competition, so that they know how to navigate the buying process and market themselves to the seller.

To start, competitive buyers must realize that some of the most rewarding things in life are often the most challenging as well. Preparing for the most difficult of business transactions will help ease the anxiety and insecurities of a buyer later on. If one is already having such feelings about there being more than just the seller to worry about, they must ask themselves if a business that is drawing no interest from other buyers is truly worth buying. Surely there are businesses that fly under the radar, but considering a business that everyone else wants to buy is a telling sign that you are in the right place.

As you begin the process of buying a small business that has a lot of interested parties, you will want to understand how the owner/seller is operating their process, and determine what is important to them. If you are worried about being the highest bidder, you shouldn't be. The selling price, while important, is going to be coupled with other important features such as deal terms, financing (getting pre-qualified is critical), post-sale terms, and length of time that the whole process will take. When you know what they are looking for, you'll be able to also determine if you are able to meet their needs and requirements, or be able to negotiate an offer attractive enough to make them consider you their ultimate business buyer. Taking the time to get to know your seller will tell you what they are looking for in a deal, and allow you to present a well-rounded reasonable purchase agreement or LOI when the time comes.

From the moment you first introduce yourself to the owner/seller, you are trying to convince them why you are the best candidate to take over their business. The financial and deal terms are important aspects of the process, but a difference in opinion there won't necessarily take you out of the running if you are able to maintain a professional attitude and your composure as a reasonable, motivated business buyer. It is important to remember that you are competing against people (other buyers) because you are marketing yourself just as much as you are marketing your business skills. Nothing will end negotiations quicker than a lack of people skills, unwillingness to find common ground, and a lack of respect. With that being said, it is critical to have a positive attitude, be willing to work together with the seller to make a deal work, and show that you are a genuine person throughout the process of buying a business. If you are able to demonstrate that you are a stand-up individual, you may not only find yourself with a new business, but a seller that is willing to help you transition into the role of a successful business owner as well.

The final area of focus that can help you beat out the competition is having the ability to come prepared and move quickly. The buying process isn't a race, and is a process that requires a lot of hard work, but coming with knowledge of the industry, a plan for obtaining financing (make sure you get professionally pre-qualified by someone who specializes in business purchase financing and work with a long list of potential banks and financial institutions!), and a strong professional team - CPA, Attorney, Finance Specialist, are all ways to speed up the business buying process. An owner/seller doesn't want to wait years to carefully vet a long line of potential buyers, and will appreciate a buyer who knows how the process works, and doesn't have to spend a lot of time working out things that they should have lined up before entering the buying process. You should be able to make and meet timely deadlines that show the business seller you mean business!

Navigating through the buying process when you have a number of (buyer) competitors is a challenging process, but can be made a lot easier if you come prepared, allocate the time to understand the owner/seller, work quickly to close a deal, and market yourself in a professional manner.

Contributor: Broker/Consultant: Elderly Care Services
Have you ever thought about how buying a business, selling a home or any simple transaction is so very very similar as to participating in a simple game of volleyball or other competition?

Who's on your side of the field, what levels of experience do they have, and what level of interest do they have in seeing you win? These are the questions I would ask myself if I was seeking out a Broker to represent me in the purchase of a business. This would be doubly important to me if I knew this was a "hot" business and that I would most likely be competing against other Buyers.

Do yourself a favor; when looking to buy a business, first find out what kind of Agency Relationship and representation you will be having with your Broker of choice. Have a candid conversation about who is representing whom. Ask what levels of experience and knowledge the Broker has in the particular industry you are seeking.

It sure is a lot easier to "win" if you know your team member has your best interest at heart and has the knowledge, experience and gusto to bring you to the finish line!

Have you ever thought about how buying a business, selling a home or any simple transaction is so very very similar as to participating in a simple game of volleyball or other competition?

Who's on your side of the field, what levels of experience do they have, and what level of interest do they have in seeing you win? These are the questions I would ask myself if I was seeking out a Broker to represent me in the purchase of a business. This would be doubly important to me if I knew this was a "hot" business and that I would most likely be competing against other Buyers.

Do yourself a favor; when looking to buy a business, first find out what kind of Agency Relationship and representation you will be having with your Broker of choice. Have a candid conversation about who is representing whom. Ask what levels of experience and knowledge the Broker has in the particular industry you are seeking.

It sure is a lot easier to "win" if you know your team member has your best interest at heart and has the knowledge, experience and gusto to bring you to the finish line!
An attractive buyer to a seller is one who can provide a) proof of funds, and b) good/excellent credit score. A competing buyer may offer a higher price, but may have to "find" the money or have so-so credit. A seller may accept a slightly lower purchase price if they feel that the deal has a higher probability of closing, because once the business is in escrow it's basically off the market.

An attractive buyer to a seller is one who can provide a) proof of funds, and b) good/excellent credit score. A competing buyer may offer a higher price, but may have to "find" the money or have so-so credit. A seller may accept a slightly lower purchase price if they feel that the deal has a higher probability of closing, because once the business is in escrow it's basically off the market.
As usual, Peter provides exceptionally clear and accurate advice for the prospective business buyer.

A business buyer who has his financing in place prior to making an offer is on the right path.

But there's more. I tell sellers that what matters most is not what they GET for their business sale, but rather what they KEEP from their business sale. If buyers are represented by a business-savvy CPA and attorney, they can often negotiate deal structures that could cost them less money but put more after-tax money in their seller's pocket. Buyers who are open to and proactive about suggesting creative deal structures can often out-maneuver their (buyer) competitors while even paying less for the business.

Another important factor: the buyer should be willing and able to conduct his due diligence in the absolute shortest time possible. If there is delay, let it be caused by the seller, not the buyer. Time kills deals -- and sellers are very leery of the buyer who needs 'to get cousin Vinny, a retired financial advisor, when he's back from vacation, to review the business records in a 'few weeks', or so." The buyer who is professional and prepared, with his professional advisors sitting on the bench ready to be put on the field to get due diligence over quickly, has a definite strategic advantage.

As usual, Peter provides exceptionally clear and accurate advice for the prospective business buyer.

A business buyer who has his financing in place prior to making an offer is on the right path.

But there's more. I tell sellers that what matters most is not what they GET for their business sale, but rather what they KEEP from their business sale. If buyers are represented by a business-savvy CPA and attorney, they can often negotiate deal structures that could cost them less money but put more after-tax money in their seller's pocket. Buyers who are open to and proactive about suggesting creative deal structures can often out-maneuver their (buyer) competitors while even paying less for the business.

Another important factor: the buyer should be willing and able to conduct his due diligence in the absolute shortest time possible. If there is delay, let it be caused by the seller, not the buyer. Time kills deals -- and sellers are very leery of the buyer who needs 'to get cousin Vinny, a retired financial advisor, when he's back from vacation, to review the business records in a 'few weeks', or so." The buyer who is professional and prepared, with his professional advisors sitting on the bench ready to be put on the field to get due diligence over quickly, has a definite strategic advantage.

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