There are many businesses for sale and many reasons to sell.
Most business owners are looking to sell their businesses for purely personal reasons.
These reasons can be about age, partnerships, family, health or the most common of all… they’ve simply had enough and it’s time to do something else.
Unfortunately, the market for the sale of businesses has always been negative.
The industry is filled with people offering advice on the pitfalls, the traps, things to watch out for, things you MUST do (always 5 or 7 things of course), the bottom line is that it’s all negative.
It’s therefore no surprise that many first time buyers get caught up in what we call the “Why are they selling loop”.
What is the “Why are they selling loop”?
There are 4 consecutive stages in the loop, which starts when a buyer finds a business they actually like.
Stage 1. It’s a good business, but I’m worried, why would they sell it?
Stage 2. If I had a business like that, I’d never sell it – I’d just employ a manager to run it for me… (I can hear the experienced business owners laughing now)
Stage 3. They must be selling the business because there’s something wrong with it.
Stage 4. I don’t want to buy a that has something wrong with it, I’ll give this one a miss.
And… back to the start with the next business.
Step 1 Hey, this business looks really good…………..but I’m worried, why would they sell it? And on and on…
Many people spend years ‘looking’ at businesses for sale but they can’t find the right one.
Ask them to define right and they say something like “I’ve seen a few good businesses but I couldn’t understand why the owners were selling. Sure, the owners had been there for 20 years, there were no kids wanting to take over the business and it was profitable and stable but… you know, it just didn’t make sense why they would sell”
Experienced business owners who become buyers rarely put themselves through this torture because they have been in the seller’s shoes and they know that it’s perfectly OK to sell a good business.
No-one is suggesting that a buyer should blindly rush into purchasing a business. A buyer should research the industry the business operates in, look at the trading history of the business and make sure they possess the skills required to operate the business, plus many other things. But the point is, don’t just focus on the negative.
Owning a good business isn’t a life sentence, business owners are allowed to sell their stable, profitable businesses and they regularly do! The idea is to be the buyer of one of them.
On top of all of this, any offer made to purchase a business should be subject to a full financial & operational due diligence being completed by the buyer and their advisors.
If there is genuinely something wrong with the business, this exhaustive process will find it BEFORE you buy.
Time to go but we’ll leave you with one pitfall………If a business owner won’t accept an offer ’subject to’ due diligence or the broker says it’s not normal to have this type of condition in your offer …RUN, RUN AWAY FAST!!