When to Create an Exit Strategy

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There is the old saying that the time to develop an exit strategy is the day you open for business. Sounds good, but it’s not very realistic. Further, it also isn’t very optimistic. On the day you open for business, thoughts about how you get out of it aren’t pleasant, or helpful, thoughts. However, as you get the business to a place where you have a bit of extra time to plan, you will find that the things you need to do to improve your business are some of the very things you will need to work on to plan an exit strategy.

You can’t predict misfortune, but you can plan for it. One never knows when an accident or illness will force one to sell. When the drive to your business becomes filled with dread, maybe it’s time to consider selling. The following ideas will improve your business, even if you’re not currently considering selling. Dealing with these areas will also supply the information a buyer will most likely be looking at when the time does come to sell.

Buyers want cash flow.

This, at least on the surface, is the thing a potential buyer will want to look at.

Appearances are important.

You may think everything about the business looks fine, but the two letters on the neon sign that don’t work indicate to a possible buyer that the seller may have lost interest in the business, causing them to also wonder what else doesn’t work or has been neglected.

There is probably more value than you think.

Business owners often don’t look at things that do create real value such as: customer lists, secret recipes, specialized computer systems, programs, customer loyalty programs, etc.

Eliminate the surprises.

Make sure the lease is transferable and that your landlord is willing to cooperate.  Resolve that issue with town hall.  Resolve the problem with that angry customer. Minor problems and issues will often raise their ugly heads during sensitive times, spooking a possible buyer. So, the time to resolve them is before going to market.

Advantages of Buying an Existing Business

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Photo Credit: morebyless via Compfight cc

Photo Credit: morebyless via Compfight cc

1. Established.

An existing business is a known entity. It has an established and historical track record. It has a customer or client base, established vendors, and suppliers. It has a physical location and has furniture, fixtures, and equipment all in place.  The term “turnkey operation” is overused, but an existing business is just that, plus everything else. New franchises may offer a so-called turnkey business, but it ends there. Start-ups are starting from scratch.

2. Business Relationships. 

In addition to the existing relationships with customers or clients, vendors, and suppliers, most businesses also have experienced employees who are a valuable asset. Buyers may already have established relationships with banks, insurance companies, printers, advertisers, professional advisors, etc., but if not, the existing owner does have these relationships, and they can readily be transferred.

3. Not “A Pig in a Poke”. 

Starting a new business is just that: “a pig in a poke.” No matter how much research, time, and money are invested, there is still a big risk in starting a business from scratch.  The existing business has a financial track record and established policies and procedures. A prospective buyer can see the financial history of the business — when sales are the highest and lowest, what the real expenses of the business are, how much money an owner can make, etc. Also, in almost all cases, a seller is more than willing to stay to teach and work with the new owner — sometimes free of charge.

4. Price and Terms.  

The seller has everything in place. The business is in operation and a price is established. Opening a new business from scratch can be the proverbial “money pit.”  When purchasing an established business, the buyer knows exactly what he or she is getting for his money. In most cases, the seller is also willing to take a reasonable down payment and then finance the balance of the purchase price.

5. The “Unwritten” Guarantee.

By financing the purchase price, the seller is saying that he or she is confident that the business will be able to pay its bills, support the new owner, plus make any required payments to the seller.

Five Kinds of Buyers

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Buyers are generally categorized as belonging to one of the following groups although, in reality, most buyers fit into more than one.

The Individual Buyer

This is typically an individual with substantial financial resources, and with the type of background or experience necessary for leading a particular operation.

The individual buyer usually seeks a business that is financially healthy, indicating a sound return on the investment of both money and time.

The Strategic Buyer

This buyer is almost always a company with a specific goal in mind — entry into new markets, increasing market share, gaining new technology, or eliminating some element of competition.

The Synergistic Buyer

The synergistic category of buyer, like the strategic type, is usually a company. Synergy means that the joining of the two companies will produce more, or be worth more, than just the sum of their parts.

The Industry Buyer

Sometimes known as “the buyer of last resort,” this type is often a competitor or a highly similar operation. This buyer already knows the industry well, and therefore does not want to pay for the expertise and knowledge of the seller.

The Financial Buyer

Most in evidence of all the buyer types, financial buyers are influenced by a demonstrated return on investment, coupled with their ability to get financing on as large a portion of the purchase price as possible.

Almost all the purchasers of the smaller businesses fall into the individual buyer category. But most buyers, as mentioned above actually fit into more than just one category.

© Copyright 2013 Business Brokerage Press, Inc.

Why Deals Don’t Close

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Sellers

  • Don’t have a valid reason for selling.
  • Are testing the waters to check the market and the price. (They are similar to the buyer who is “just shopping.”)
  • Are completely unrealistic about the price and the market for their business.
  • Are not honest about their business or their situation. The reason they want to sell is that the business is not viable, it has environmental problems or some other serious issues that the seller has not revealed, or new competition is entering the market.
  • Don’t disclose that there is more than one owner and they are not all in agreement.
  • Have not checked with their outside advisors about possible financial, tax or legal implications of selling their business.
  • Are unprepared to accept seller financing or now unwilling to accept it.

Buyers

  • Don’t have a valid reason to buy a business, or the reason is not strong enough to overcome the fear.
  • Have unrealistic expectations regarding price, the business buying process, and/or small business in general.
  • Aren’t willing (many of them) to do the work necessary to own and operate a small business.
  • Are influenced by a spouse (or someone else) who is opposed to the purchase of a business.

Seller Financing: The Basics

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Seller financing has always been a mainstay of business brokerage.  Buyers don’t have the capital necessary to pay cash, are unable to borrow the money, or are reluctant to use all of their capital.  Buyers also feel that a business should pay for itself and are wary of a seller who wants all cash or who wants the carry-back note secured by additional collateral. What sellers seem to be saying, at least as perceived by the buyer, is that they don’t have a lot of confidence in the business or in the buyer or perhaps both.  However, if you look at statistics, it’s apparent that sellers usually receive a much higher purchase price if they accept terms.

Studies reveal that, on average, a seller who sells for all cash receives only about 80 percent of the asking price.  Sellers who are willing to accept terms receive, on average, 86 percent of the asking price. The seller who asks for all cash receives, on average, a purchase price of 36 percent of annual sales while the seller who will accept terms receives, on average, 42 percent of annual sales.  These are compelling reasons for a seller to accept terms.  Business brokers have long been aware that reasonable terms are necessary if sellers are serious about selling their businesses.

The primary reason sellers are reluctant to offer terms is their fear that the buyer will be unsuccessful.  If he or she should stop making payments, the seller will be forced to take back the business, hope that the buyer can resell the business, or forfeit the balance of the note.  Another reason is that sellers feel that they can do more with cash than with the receipt of monthly payments. How often do sellers say that they need cash so they can buy another business?  That is probably not the real reason, but selling their business (or house) may be the only time that they can get a “chunk of cash.”  A business broker can help alleviate these fears by pointing out some of the ways sellers can protect their investment and by explaining some of the advantages of carrying the balance of the purchase price.  Equally important is how the deal itself is structured.

Let’s first take a look at the advantages to the seller of financing the sale:

  • The chances of the business actually selling are much greater with seller financing.
  • The seller will achieve a much higher price for the business with seller financing.
  • Most sellers are unaware of how much the interest can increase their actual selling price. For example, a seller carry-back note at 8 percent carried over nine years will actually double the amount carried.  $100,000 at 8 percent over a nine year period results in the seller receiving $200,000.
  • With interest rates currently low [at this writing], sellers can get a much higher rate from a buyer than they can get from any financial institution.
  • Sellers may also discover that, in many cases, the tax consequences of accepting terms are a lot more advantageous than those on an all-cash sale.
  • Financing the sale tells the buyer that the seller has enough confidence that the business will, or can, pay for itself.
  • The seller may be able to borrow some cash using the note and security agreement as collateral.  It may not be as easy as borrowing against real estate notes, but it’s still better than nothing.

What Would Your Business Sell For?

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There is the old anecdote about the immigrant who opened his own business in the United States. Like many small business owners, he had his own bookkeeping system. He kept his accounts payable in a cigar box on the left side of his cash register, his daily receipts – cash and credit card receipts – in the cash register, and his invoices and paid bills in a cigar box on the right side of his cash register.

When his youngest son graduated as a CPA, he was appalled by his father’s primitive bookkeeping system. “I don’t know how you can run a business that way,” his son said. “How do you know what your profits are?”

“Well, son,” the father replied, “when I came to this country, I had nothing but the clothes I was wearing. Today, your brother is a doctor, your sister is a lawyer, and you are an accountant. Your mother and I have a nice car, a city house and a place at the beach. We have a good business and everything is paid for. Add that all together, subtract the clothes, and there’s your profit.”

A commonly accepted method to price a small business is to use Seller’s Discretionary Earnings (SDE). The International Business Brokers Association (IBBA) defines SDE as follows:

Discretionary Earnings – The earnings of a business enterprise prior to the following items:

  • income taxes
  • nonrecurring income and expenses
  • non-operating income and expenses
  • depreciation and amortization
  • interest expense or income
  • owner’s total compensation for one owner/operator, after adjusting the total compensation of all other owners to market value

Here are some terms as defined by the IBBA:

  • Owner’s salary – The salary or wages paid to the owner, including related payroll tax burden.
  • Owner’s total compensation – Total of owner’s salary and perquisites.
  • Perquisites – Expenses incurred at the discretion of the owner which are unnecessary to the continued operation of the business.

Developing a Multiplier

Once the SDE has been calculated, a multiplier has to be developed. The following (just as a guideline) should be rated from 0 to 5 with 5 being the highest. For example, if the business is a highly desirable business in the current market, “desirability” would be rated a 4 or 5. If the business is in an industry that is quickly declining or nearly obsolete, “industry” would be given a 0 or 1 rating.

  • Age: Number of years the seller has owned and operated the business.
  • Terms: Is the seller willing to offer terms?  For example, will the seller accept 40 percent as a down payment with the seller carrying back 60 percent at terms the business can afford while still providing a living for the buyer?
  • Competition: Consider the local market.
  • Risk: Is the business itself risky?
  • Growth trend of the business: Is it up or down?
  • Location/Facilities
  • Desirability: How popular is the business in the current market?
  • Industry: Is the industry itself declining or growing?
  • Type of business: Is the business type easily duplicated?

The average business sells for about 1.8 to 2.5. Obviously, if the SDE is solid and the multiple is above average, the price will be higher. Keep in mind that the price outlined includes all of the assets including fixtures and equipment, goodwill, etc. It does not include real estate or saleable inventory. The price determined above assumes that the business will be delivered to the buyer free and clear of any debt.

Veteran Wisdom

When all else fails, the words of a veteran business broker will work.

Asking Price is what the seller wants.

Selling Price is what the seller gets.

Fair Market Value is the highest price the buyer is willing to pay and the lowest price the seller is willing to accept.

Sellers should keep in mind that the actual price of a small business is about 80 percent of the seller’s asking price.

Time to Sell Your Business?

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Sell my business?  Many business owners like you are asking: “When is the right time to sell my business?”  To Empire Business Solutions, a M&A Business Broker in Orange County, California, the answer often relies on three factors, which I will explain below.  However the correct question should be: “When is a good time to take some money off the table?”  These days, with all the private equity (PEG) activity and options, business owners should look at not just the ultimate exit, but whether a partial exit makes sense.

Today it is possible to sell a portion of the company to take advantage of favorable market conditions and diversify your net worth, yet continue to run your company.  So let’s consider whether now is a good time to seek liquidity—either partial or full liquidity.

The three considerations for evaluating the timing of an exit are:

  1. Is the overall market for selling companies favorable?
  2. Is the company’s recent performance strong enough to attract a favorable price?
  3. Am I emotionally prepared and motivated to either exit my company or willing to bring a partner on board to help me take the business to the next level?

It is not likely that you will experience the perfect storm where all three of these considerations are good simultaneously.  Rarely do all the stars line up.  Those who wait for that perfect moment typically wait too long to exit; they are forced to continue in the business longer than they desire or to accept a sub-optimal price.

But the answer to all three questions needs to be acceptable, or the timing might not be right.

In 2012, the answer to the first question is that the market for selling most private companies is getting more favorable.  The prices being paid today are not quite as aggressive as they were at the peak in 2007 and early 2008.  But they are close, and as good as we can expect to see in this new era of limited leverage for the foreseeable future.

Today U.S. corporations have more cash on hand than any time in history.  They are anxious to put it to work, and acquisitions are the most expedient way for many of them to do so.  Additionally, private equity firms have an unprecedented level of cash (often called “Dry Powder”) to acquire businesses.   There are over 5000 firms that have to invest in private businesses to justify their existence.  A private equity firm cannot survive unless it invests all of its capital because its investors will ask for their money back—with a return—in either 8 or 10 years from the commencement of the fund.  Today there is a significant pent up demand among both the strategic (corporate) buyers and financial (private equity) buyers.

Moreover, when selling a business, the concern should not be: How much do I get?  Rather, it should be: How much do I keep?  And that is a function of the tax code.  Late last year Congress extended the Bush tax cuts.  That means capital gains rates will remain at 15% until the end of 2012 and hopefully longer.  Our current budget deficit is unsustainable, and tax rates will go up after 2012 and probably never be this low again in our lifetime.

So that leads us to the next question: How is your company performing?  A surprising number of my clients did well in 2012.  If you are in that boat, 2013 should be a superb time from a market standpoint.  The field will get very crowded next year.  But some businesses did not fare as last year.  If you are in that boat, look at 2013 as a time to maximize your bottom line so you can cash out in the coming years.

The final question is whether you are mentally, emotionally and financially ready to exit.  Let’s just summarize some key considerations.
First of all, give up the notion that you can sell your business and invest all the proceeds in Treasury securities with no risk and maintain the same income.   A low risk diversified portfolio of liquid securities will never yield the same return as a private company.  You may think your company is low risk because you are in control.  But from a pure finance perspective, it is not.

If you are not financially or emotionally ready to fully cash out today, you should consider selling part of your business to a private equity firm now, continuing to own a meaningful percentage and operating the business.  Then you can set aside enough cash to take care of most or all of your family’s financial needs and sleep a little better the next time we have a financial or political crisis.  It is not a question of if, but when.  And you can have access to the expertise of professional investors who are trained in how to build business value.  Out of over 5000 funds, surely there is one or two which you could get along with.  Perhaps not.  But to take your company to the next level, having some outside counsel usually helps.  Then in 3, 4 or 5 years you can exit fully—have your second bite at the apple—and provide a nice return to your investors and yourself (and not have all your eggs in one basket in the meantime.)

If you are the type that does not think you could function with a partner in the mix, and you know you want to retire in the next few years, you should target the end of 2013 as the time to be safely out of the business and hope the tax rates have not increased.  And since it generally takes up to 12 months to complete a sale transaction, you need to get busy looking for the right team.  To get the best deal, you need to have an advisor who will pro-actively approach every logical buyer out there and make sure you have several parties to negotiate with.  A competitive process is the only way to assure a successful outcome.

Selling Your Business? Expect the Unexpected!

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According to the experts, a business owner should lay the groundwork for selling at about the same time as he or she first opens the door for business. Great advice, but it rarely happens. Most sales of businesses are event-driven; i.e., an event or circumstance such as partnership problems, divorce, health, or just plain burn-out pushes the business owner into selling. The business owner now becomes a seller without considering the unexpected issues that almost always occur. Here are some questions that need answering before selling:

How much is your time worth?

Business owners have a business to run, and they are generally the mainstay of the operation. If they are too busy trying to meet with prospective buyers, answering their questions and getting necessary data to them, the business may play second fiddle. Buyers can be very demanding and ignoring them may not only kill a possible sale, but will also reduce the purchase price. Using the services of a business broker is a great time saver. In addition to all of the other duties they will handle, they will make sure that the owners meet only with qualified prospects and at a time convenient for the owner.

How involved do you need to be?

Some business owners feel that they need to know every detail of a buyer’s visit to the business. They want to be involved in this, and in every other detail of the process. This takes away from running the business. Owners must realize that prospective buyers assume that the business will continue to run successfully during the sales process and through the closing. Micromanaging the sales process takes time from the business. This is another reason to use the services of a business broker. They can handle the details of the selling process, and they will keep sellers informed every step of the way – leaving the owner with the time necessary to run the business. However, they are well aware that it is the seller’s business and that the seller makes the decisions.

Are there any other decision makers?

Sellers sometimes forget that they have a silent partner, or that they put their spouse’s name on the liquor license, or that they sold some stock to their brother-in-law in exchange for some operating capital. These part-owners might very well come out of the woodwork and create issues that can thwart a sale. A silent partner ceases to be silent and expects a much bigger slice of the pie than the seller is willing to give. The answer is for the seller to gather approvals of all the parties in writing prior to going to market.

How important is confidentiality?

This is always an important issue. Leaks can occur. The more active the selling process (which benefits the seller and greatly increases the chance of a higher price), the more likely the word will get out. Sellers should have a back-up plan in case confidentiality is breached. Business brokers are experienced in maintaining confidentiality and can be a big help in this area.

Rating Business Buyers in Today’s Market

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Making the initial decision to sell is tough, but once that decision is made, there are many diverse options.  Small businesses are more sophisticated than ever, and the individuals purchasing these businesses are complex and come from varied backgrounds.  Here is an overview of the most active categories of business buyers in today’s market:

Groupings of Family Members

People within a business owner’s own family often opt to buy the family business. In fact, this stands as one of the more common types of small business buyers.  One reason is that business owners are more comfortable with a relative taking over the prized business, as they often built it up from nothing.  Quite often the family member looking to take over the family business has been carefully groomed and tested over the years to ensure that he or she is ready to be the true “heir apparent.”  In this kind of situation, the family member truly is the best person to buy the business.

However, there is a downside.  Family dynamics can be quite complex, and a variety of conflicts may develop.  Issues may quickly arise ranging from whether or not the departing business founder and family member can really leave the business to whether or not the new buyer actually has the funds to make the purchase.  These, and similar issues, can cause significant disruption in the transaction of the sale.  In short, families come with histories and their own, and often complex, internal issues and discord can arise.  This means that an outside buyer is often the best possible option.

When it comes to determining whether or not a family member is the right buyer for a given business, it is necessary to look at three vital issues: the ability of the family member, the financial standing of the family member and the agreement amongst the family.

Selling a Business to a Business Competitor

Business competitors are frequently overlooked when it comes time to sell a business.  Why?  Usually there is a concern that a competitor will take advantage of the knowledge that a business is up for sale and may try to attract existing customers or clients away from the selling business.  Yet, if the business meets the needs of a competing company, they may be willing to strike a very good deal in order to acquire the business and expand.

When it comes to selling a business to a competitor, a business brokerage professional can prove to be quite useful.  One reason for this is that they can use confidentiality agreements so that the name of the business being sold is only revealed after contacting the seller and further qualifying the competitor in question.

Selling to a Foreign Buyer

Foreigners love the idea of buying a business in the United States.  There are many reasons why they find this notion to be attractive.  For example, by opting for an existing business many foreigner business owners are able to bypass difficulties such as licensing, finding a job in their own profession and issues with a language barrier.  Many of these types of concerns can by circumvented, to an extent, by opting for an established entity.

Commonly this kind of buyer is accustomed to working very long hours and is already a successful business owner in his or her own right.  Yet, this does not mean that their business acumen will coincide with that of the seller.  Once more, this is where the expertise of a company can come into play.

There is one additional note to consider when selling to a foreign buyer.  Small business owners often believe that foreign companies and independent buyers will “pay big” for their business.  However, the fact is that foreign companies are usually only interested in acquiring businesses or companies that already have sales in the millions.

Dealing with Synergistic Buyers

A synergistic buyer is one that believes that a given business would stand as a perfect fit for his or her own existing business.  Part of the thinking is that by acquiring the new business, this buyer will be able to lower costs, gain new customers and incur other important benefits and advantages.  It is interesting to note that synergistic buyers often will pay more than other buyers due to the fact that they see tangible, and perhaps even immediate, benefits for making the purchase.  Similar to working with a foreign buyer, synergistic buyers rarely look at small businesses, but instead seek out mid-sized companies that meet their overall criteria.

Financial Buyers

In short, financial buyers can be quite demanding as they potentially have a long list of demands.  The bottom line for these buyers is that they want maximum leverage.  Yet, they also fall into the right category for a seller who wants to continue to manage his or her company after it has been sold.  Financial buyers frequently play “hardball” and will make an offer that is lower than other types of offers.  However, they often make non-financial provisions that could be important to the seller, such as the location of the business, the retention of key employees and a myriad of other factors.

Financial buyers are only interested in a business that is able to yield enough profits to support both the existing management and provide a return on the investment to the owner.

The Individual Buyer

The majority of sellers of small to mid-sized businesses want to deal with the individual buyer if possible.  Quite frequently these buyers are mature, ranging in age between 40 and 60, and are experienced veterans of the corporate world.  For these buyers, owning a business not only is a dream, but also it is something that they now can afford.  Understanding what this kind of buyer wants is a key component in making the deal happen.

In general, any buyer that is looking to replace an existing job is a very good prospect.  Owning a business is clearly much more involved than being someone else’s employee, and these new responsibilities and potential risks can frighten many prospects away.  Yet, this category of buyer has a deep internal need or “drive,” which may help make the deal happen.  Further, the individual buyer may approach the deal with fewer strings and other assorted complications than many other types of potential buyers.

One Final Thought

Sifting through the various potential buyers to find the right one can be complicated.  As a result, it is best to leave this process in the hands of professionals  who have the experience and know how necessary to decide on the best possible prospects.

Why Do Deals Fall Apart?

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 In many cases, the buyer and seller reach a tentative agreement on the sale of the business, only to have it fall apart.

 

There are reasons this happens, and, once understood, many of the worst deal-smashers can be avoided. Understanding is the key word. Both the buyer and the seller must develop an awareness of what the sale involves–and such an awareness should include facing potential problems before they swell into floodwaters and “sink” the sale.

What keeps a sale from closing successfully? In a survey of business brokers across the United States, similar reasons were cited so often that a pattern of causality began to emerge. The following is a compilation of situations and factors affecting the sale of a business.

The Seller Fails To Reveal Problems
When a seller is not up-front about problems of the business, this does not mean the problems will go away. They are bound to turn up later, usually sometime after a tentative agreement has been reached. The buyer then gets cold feet–hardly anyone in this situation likes surprises–and the deal promptly falls apart. Even though this may seem a tall order, sellers must be as open about the minuses of their business as they are about the pluses. Again and again, business brokers surveyed said: “We can handle most problems… if we know about them at the start of the selling process.”

The Buyer Has Second Thoughts About the Price
In some cases, the buyer agrees on a price, only to discover that the business will not, in his or her opinion, support that price. Whether this “discovery” is based on gut reaction or a second look at the figures, it impacts seriously on the transaction at hand. The deal is in serious jeopardy when the seller wants more than the buyer feels the business is worth. It is of prime importance that the business be fairly priced. Once that price has been established, the documentation must support the seller’s claims so that buyers can see the “real” facts for themselves.

Both the Buyer and the Seller Grow Impatient
During the course of the selling process, it’s easy–in the case of both parties–for impatience to set in. Buyers continue to want increasing varieties and volumes of information, and sellers grow weary of it all. Both sides need to understand that the closing process takes time. However, it shouldn’t take so much time that the deal is endangered. It is important that both parties, if they are using outside professionals, should use only those knowledgeable in the business closing process. Most are not. A business broker is aware of most of the competent outside professionals in a given business area, and these should be given strong consideration in putting together the “team.” Seller and buyer may be inclined to use an attorney or accountant with whom they are familiar, but these people may not have the experience to bring the sale to a successful conclusion.

The Buyer and the Seller Are Not (Never Were) in Agreement
How does this situation happen? Unfortunately, there are business sale transactions wherein the buyer and the seller realize belatedly that they have not been in agreement all along–they just thought they were. Cases of communications failure are often fatal to the successful closing. A professional business broker is skilled in making sure that both sides know exactly what the deal entails, and can reduce the chance that such misunderstandings will occur.

The Seller Doesn’t Really Want To Sell
In all too many instances, the seller does not really want to sell the business. The idea had sounded so good at the outset, but now that things have come down to the wire, the fire to sell has all but gone out. Selling a business has many emotional ramifications; a business often represents the seller’s life work. Therefore, it is key that prospective sellers make a firm decision to sell prior to going to market with the business. If there are doubts, these should quelled or resolved.

Some sellers enter the marketplace just to test the waters; to see if they could get their “price,” should they ever get really serious. This type of seller is the bane of business brokers and buyers alike. Business brokers generally can tell when they encounter the casual (as opposed to serious) category of seller. However, an inexperienced buyer may not recognize the difference until it’s too late. Most business brokers will agree that a willing seller is a good seller.

Or…the Buyer Doesn’t Really Want To Buy
What’s true for the mixed-emotion seller can be turned right around and applied to the buyer as well. Buyers can enter the sale process full of excitement and optimism, and then begin to drag their feet as they draw closer to the “altar.” This is especially true today, with many displaced corporate executives entering the market. Buying and owning a business is still the American dream–and for many it becomes a profitable reality. However, the entrepreneurial reality also includes risk, a lot of hard work, and long intense hours. Sometimes this is too much reality for a prospective buyer to handle.

And None of the Above
The situations detailed above are the main reasons why deals fall apart. However, there can be problems beyond anyone’s control, such as Acts of God, and unforeseen environmental problems. However, many potential deal-breakers can be handled or dealt with prior to the marketing of the business, to help ensure that the sale will close successfully.

A Final Note
Remember these three components in working toward the success of the business sale:

  • Good chemistry between the parties involved.
  • A mutual understanding of the agreement.
  • A mutual understanding of the emotions of both buyer and seller.
  • The belief, on the part of both buyer and seller, that they are involved in a good deal