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Why Is The Seller Selling? And Should That Reason Influence Your Decision?

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Comments & Replies: 2     Views: 4424     Posted By: Business Broker  

After speaking with literally thousands of owner/sellers in the San Diego County area, I think I have heard all the reasons why a small business owner/seller wants to sell. But does it really matter their reason? It may shock you to hear mostly I don't think so.

Topics: Business Brokerage, Buying A Business, Selling A Business     Tags: business brokers, buying a business, selling a business


Contributor: Business Broker: Southern California

After speaking with literally thousands of owner/sellers in the San Diego County area, I think I have heard all the reasons why a seller wants to sell. But does it really matter their reason? It may shock you to hear mostly I don't think so.

Of course, I hear from buyers every day: "I want to buy an established, profitable, and well-run business from someone that has owned it for 30 years and is now retiring at age 70." That would be great, because the seller's motivation to sell is easily understood. But rarely does that opportunity come up.

The stated reason that someone is selling their business could be one of the four "D's": Death, Divorce, Disability, or Dissolution of a partnership. All legitimate reasons to sell. But what about "seller burnout", "other opportunities", or "medical issues?" Could burnout be a code for "This business is burning out and I want out before it burns me?" Could "Other Opportunities" mean the seller wants to pursue an opportunity with a business that will make money? Could "Medical Issues" mean that the seller is sick - SICK of the business? Certainly, any of these reasons for sale could be red flags, but they also could be legitimate reasons as well.

And one thing you or even the broker may ever know, is the real reason behind a sale. I have had sellers state they are just burned out, but in truth, they were divorcing, and they didn't want either the broker or the buyer to know the real reason as they felt it put them at a disadvantage in the negotiations.

So, while it may seem odd, if the seller has owned the business for over 5 years, don't stress over the "reason for sale." Just do your due diligence on the business, the industry, the competition, and the lease/trade area, and if there are other factors involved, you will probably find them. And if the business is being sold before five years of ownership, then just open those eyes a little wider! But don't limit yourself to the 70 year-old retiring owner - or you might miss some pretty good opportunities!


I've found that buyers are interested in why a seller is selling, but a question that comes up more is "how long have they been there?" If I was a buyer I'd more interested if the seller had been there for a year, 3 years, ten years, etc. Maybe a seller has a medical emergency and needs to sell, but if they've only owned the business for six months, then I'd definitely be more cautious than if they'd been there for 5 years. I understand why a seller may not want to give the true reason for selling because of divorce, debt, etc., because they might not want buyers to think they are desperate and create the impression that it is a fire sale.


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