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

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Comments & Replies: 2     Views: 2777     Posted By: Ken Oppeltz  Ken Oppeltz, CBI, CBB: San Diego 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



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.


  Helpful Resources To Assist In Selling And Buying California Businesses
Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

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.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Chuck Post: Laundry Buyer Representation, Consulting, Due Diligence

Chuck Post has 32 years experience in the laundry industry, specializing in assisting laundry buyers (and entrepreneurs) with buying or starting up, building, re-tooling, laundries throughout California. Laundry buyer representation, consulting, due-diligence, lease negotiations, laundry valuations.

Janet Carrera - Escrow & Bulk Sale Services - 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.

Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance

For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.

Michael Davidson, Business Broker - Southern California

Los Angeles Business Broker providing M&A quality services for Small Business Owners. We leverage our technology and expertise to Simplify & Expedite the Business Sales Process. Matching the right buyer with the right business is how we define success.

Ken Oppeltz, Business Broker, San Diego County

We have been San Diegos premier business broker and merger and acquisition specialist since 1989. Staffed with some of the best-qualified and most experienced business brokers in the industry, our professionals have all earned or are candidates for the Certified Business Intermediary (CBI).


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