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  Home > Discussions > What Mistakes Should Serious Business Buyers Avoid?

Blog Post What Mistakes Should Serious Business Buyers Avoid?

Initiated By: Peter Siegel, BBN Facilitator at 925-785-3118, 925-785-3118 (Cell) - Log In To Message/Email This Contributor

Comments & Replies: 11   Topics: buying a business, deal structures, legal issues

Discussion Description: Every day, I speak to business brokers and business owner/sellers, and I hear some pretty amazing stories about potential buyers of small to mid-sized businesses. I tend to ask them what traits they listen for to see if a potential buyer is serious and what traits or buyer actions are deal killers.

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Every day I speak to business brokers, business owner/sellers and I hear some pretty amazing stories about potential buyers of small businesses. I tend to ask them what buyer traits do you listen for to see of a potential buyer is serious? What traits or buyer actions are "deal killers"?

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.

If buyers want to be taken seriously, they have to act professionally. And the person who knows how the buyer should act is the business broker. For most buyers, this will be the first and only business they will ever acquire, and for a smaller number, it may be one of a few acquisitions they will make. But, the broker deals with scores of sales a year, and hundreds, perhaps thousands, in a career. Yet, so many prospective buyers know it all, to their detriment.

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?"

Many great points have been mentioned, and so I won't repeat, but there's one thing I encourage buyers to do early on in their hunt, which is don't see too many business at once. There are so many listings on the market at a time, and so it is easy for a buyer to become overwhelmed, especially if they are a novice. When a buyer calls me up, I only show them three businesses at a time, even though they want to see more, I only send them out on three.

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.

This Discussion's Contributors

Contact: Peter Siegel, MBA at 925-701-8064 X313, 925-785-3118 (Cell)   Log In To Message/Email This Contributor
Profile: I founded BizBen and BizBenNetwork to make the process of buying and selling small to mid-sized businesses more efficiently. I currently head up the Facilitator team at BizBenNetwork where we assist BBN Members with connecting with others to facilitate a deal. Thanks for using BizBenNetwork!
Key Words: BizBen, BizBenNetwork, facilitator, advisor, consultant, peter siegel, siegel, bbn
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Contact: Tim Cunha at 650-600-3751, 650-204-1802 (Cell)   Log In To Message/Email This Contributor
Profile: I am an experienced entrepreneur, attorney, & business professor. I & my EvergreenGoldĀ® team offer business owners sound advice & expertise to build business value & achieve profitable sales. Call me today for a FREE business evaluation & SWOT analysis for your business anywhere in the USA.
Key Words: tim cunha, cunha, EvergreenGold, california, sf bay area, business broker, brokerage, san francisco, palo alto, santa clara county, contra costa county, alameda county, marin county, sonoma county, san mateo county
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Contact: Joe Ranieri at 714-292-5448, 714-292-5448 (Cell)   Log In To Message/Email This Contributor
Profile: Having owned businesses for over 22 years, my interest turned to listing and selling businesses rather than owning them. I specialize in high volume restaurants, fast food independents & chains, bars, liquor stores, small manufacturers & service businesses in Orange and LA Counties in California.
Key Words: joe ranieri, remax, re/max commercial, business broker, restaurant, cafe, fast food, buffet, retail, bakery, food, juice, bars, mexican, coffee, tea, dessert, sandwich, grill, coffee house, mediterranean, turkish, pizza, asian, sushi, japanese, chinese, sports bar, diner, liquor, market, mart, orange, san bernardino, huntington beach, long beach, los angeles, costa mesa, hollywood, fountain valley, cerritos,
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Tim Cunha JD, Business Broker, SF Bay Area 0719
Joe Ranieri - Business Broker, Orange County, LA County, California - 0219

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