What Mistakes Should Serious Business Buyers Avoid?
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I know when I was a business broker (many moons ago) if a potential buyer said these four items (or several of them - not in any particular order) to me I probably passed on working with them very seriously:
1. "Don't worry about the amount of money I have for a down payment - I have plenty."
2. "I don't really care where the business is located, it's not important."
3. "I don't care what type of business I buy, I am interested in all types of businesses."
4. "I've been looking for a business to buy for over 2 years and haven't made an offer yet on any - non of the deals I've looked at made any sense."
In my opinion all of these buyers made statements that showed to me that they either weren't educated about the process of buying a business, didn't understand the protocol of buying, or just weren't serious about buying in the first place.
What interesting things have you heard from business buyers that made you sense they aren't really serious about buying a business and what advise would you give to serious buyers about what to say, and what to do right when seeking a business to purchase? I would love to hear some funny, interesting stories about past or current buyers and some helpful advise you would give to would be serious buyers.
The listing broker will expect the following from the prospective buyer: a fully-completed and signed NDA, a detailed financial profile, and a summary of educational and experiential background. Why? Because the seller expects that information before expending hours of time and disclosing highly-sensitive confidential information to a total stranger.
In addition, the buyer should be prepared to discuss with the broker their goals and expectations for a business in terms of time, income, and life-style, preferences for the type of industry and the location, whether they prefer business-to-consumer or business-to-business, 9-5 M-F or 24/7, bricks-and-mortar or service or virtual, retail or distribution or manufacturing, franchise or non-franchise, etc., etc. The broker isn't going to waste his time and energy or the seller's time and energy with a prospect who hasn't invested their time and energy in considering and answering these questions.
Furthermore, I have encountered too many "serious buyers" who have never been an entrepreneur, but somehow believe they know all about buying and managing a business. And, I have seen many such "serious buyers" waste their own time and that of brokers and sellers and I've seen them miss some great opportunities because they won't acknowledge that they have a lot to learn.
Again, if buyers would recognize that the business broker particularly the business broker who has owned and operated his own businesses can be a priceless resource for them, they would be far more successful in their business search, business acquisition, and business management.
So, the most successful buyers are the ones who say:
I don't know show me, teach me, advise me.
How much of a down payment should I typically need?
What financing options are there from sellers, the SBA, financial institutions?"
What professionals should I have working with me in my search, during due diligence, in the transition of ownership?
"What parameters should I be setting for the search?
What are your suggestions for matching my abilities, finances, lifestyle, and goals with compatible businesses?"
A novice buyer can be tempted to want to see as many businesses at once, which is understandable, but it's easy to be overwhelmed, and then defeated by the shear amount of information.
A buyer should think hard about what type of business they actually want to go into, and then look at about 3 at a time, and then reflect upon what works and doesn't, and then talk with the broker and go see three more.