“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” – Winston Churchill
Confidence Key to Buying or Selling Businesses
Selling or purchasing a business requires confidence. A seller must have the confidence that the asking price is fair, and the buyer must have the confidence that the price he or she is paying is fair. The confidence about selling or buying a business should also translate into confidence about going through the necessary stages of a business deal. These stages include signing a Non-Disclosure Agreement, making and accepting an offer, the formal due diligence phase, and closing. While hiring an experienced business broker and other advisors for assistance, the buyer and seller should always have the confidence that they are ultimately in charge.
The Principals of the Deal Are in Charge
Both parties or principals to a business transactions must remember that they are in charge of the deal. It is they as the principals who ultimately have to live with the consequences far after the closing, and they must always assert themselves as being in control of the deal when seeking the advice or assistance of any outside parties. Such advice or assistance (from a non-broker) must be weighed properly by the principals and should always be communicated to them before negotiations of the deal commence.
Choose the Right Advice
- Obtaining legal advice from an attorney or tax advice from an accountant is always a good idea.
- It should be encouraged by every responsible business broker.
- But such professionals – while usually good intentioned – do not normally have direct experience selling businesses.
- Lawyers or accountants do not typically know the realities of the present day market for buying or selling businesses in Palm Beach County.
- Moreover, they and other ‘advisors’ usually get paid by the hour.
- Asking an attorney if there are problems with a business deal or contract is a bit like asking a barber if you need a haircut.
- The answer is always YES!
- An intelligent seller or buyer of a business always uses a good dose of common sense and an ability to see the forest from the trees when seeking any outside counsel.
Set Parameters for Advice
A successful seller or buyer of a business must – when dealing with outside assistance – set clear parameters in place from the outset. The parameters ensure that the principals are in charge of the deal – no one else (including the broker!). Sellers and buyers must know what terms of the deal are truly important to them and why. Buyers must, for example, have a clear understanding of what they want to accomplish during the formal due diligence process. An accountant or attorney should not be focused on other matters during the formal due diligence process which are not relevant to what the buyer is seeking to accomplish. The buyer must in this example clarify to their outside assistance that they stay within the parameter of satisfying the buyer’s goals (not their own).
Establish Trust When Selling A Business
A business owner should strive to establish trust with a buyer, and assistance from outside parties to the deal should not interfere with this trust. Otherwise the deal is likely to collapse. When a seller signs a Letter of Intent or communicates a counter-offer to a buyer, they should not subsequently change their mind about a relevant matter. This sometimes happens when the seller is persuaded by an outside ‘advisor’ to do so. This will cause the buyer to feel betrayed and will no longer trust the seller. While it is perfectly legal for the seller to change their mind before signing the final contract, doing so after signing an LOI will eviscerate any trust on the part of the buyer. The key is that the seller should receive any advice prior to communicating their acceptance of any terms from the buyer.
Principals in Charge of Negotiations
The seller is always in charge of what price they will accept for their business, and a buyer should always be in charge of what price they are willing to pay for the business. No outside party – including the broker – should force a party to make or accept an offer on a business. During the course of negotiations, the seller and the buyer should always be the final authority on what terms of the deal are important to them.
Take Control of the Deal from the Outset
Seeking legal or accounting advice for a business transaction is perfectly fine and should be encouraged. But such advice should always be given with the caveat that the principals themselves are ultimately in charge, and advice must be given before either party commences negotiations. New terms can not be injected into a deal upon the advice of an expert, or the deal will almost certainly collapse. Take control of the situation from the outset, and figure out what is important to you as the buyer or seller of a business.
Give Martin a call today at 561-827-1181 for a FREE evaluation of your business!