Establishing Trust Is Key for South Florida Business Sales
In business as in life, establishing personal rapport and honest communication is essential for two parties to trust and understand one another. When buying and selling a South Florida business, the direct principals of the deal (the actual buyer and seller) invariably meet in person at some point in the sales process. This in-person meeting (facilitated of course by the business broker) is absolutely critical. Let’s explore the purpose and goals of this meeting and learn how both the buyer and seller can best take advantage of this opportunity.
When Does Buyer-Seller Meeting Occur?
A direct meeting between the buyer and seller usually occurs prior to the buyer making an offer to purchase the business. As a part of the buyer’s preliminary due diligence, the buyer typically will want to tour the business and meet directly with the seller in order to get questions answered. The direct meeting between the buyer and seller never occurs until the buyer is properly qualified by the business broker. This includes requiring the buyer to sign and fully execute a Non-Disclosure Agreement (NDA) which protects the seller’s confidentiality. Establishing that the buyer has sufficient funds or funding capability to buy the business is another crucial component of the qualifying process. Neither the broker nor the seller of the business desires to waste their time meeting with a buyer who is not properly qualified.
Buyer and Seller Should Prepare Prior to Meeting
- Preparation is key prior to any important business meeting, and it is even more important when a business buyer and business seller meet for the first time.
- If a buyer is unprepared and does not seem knowledgeable about the industry or business (in other words, if it is apparent he or she has not “done their homework”), then the seller is likely to be turned off and unwilling to candidly answer the buyer’s questions.
- A business buyer should complete all of their preliminary due diligence prior to meeting the seller.
- This can include closely examining the listing material provided by the business broker, researching the industry and nearby competitors, and simply taking the time to thinking through key issues that must be addressed prior to making an offer.
- Conversely, the business seller may want to research (by ‘googling’) the buyer prior to the meeting.
- If the buyer is a competitor, then the seller will certainly want to research the buyer’s company and see if an acquisition makes sense.
- The seller should also use the buyer-seller meeting as a critical opportunity in which to gauge whether the buyer will be successful in operating the business.
- This is important since a buyer’s offer will frequently ask the seller to give at least some seller-financing.
- Whether or not a seller agrees to give seller-financing in large part depends on whether the seller trusts the buyer to be a successful operator of the business.
- The seller should not be shy about asking the buyer direct questions as to how the buyer plans to operate the business successfully.
- If the buyer is not prepared to answer this question, then the seller is highly unlikely to give the buyer any seller-financing.
Business Buyer Should Write Out Questions to Ask Business Seller At Meeting
Most business brokers will tell you that a buyer who does not bring a list of prepared questions to a buyer-seller meeting is either not a serious buyer or so familiar with the business or industry that a list of questions is unnecessary. In reality, most buyers need to take the time and write down their list of questions. Writing down a list of questions helps most buyers organize their thoughts and uncover questions or issues they may not think of otherwise. Additionally, the buyer should not ask questions or raise issues after the meeting if they could have been addressed at the meeting. This tends to annoy the seller, and frequently leads to conflict. It is far better to raise all possible issues or questions at the meeting. This will allow the buyer to properly complete their preliminary due diligence, and it will also show the seller that the buyer is serious and well prepared.
The Post-Closing Transition Should Be Addressed At Buyer-Seller Meeting
- Ensuring a smooth hand over of a business is always critically important for a business buyer.
- This post-closing transition period usually involves a free training period, and if necessary, a paid training period or paid role for the seller in the business after the free training period.
- For businesses where the seller plays an active or crucial role in the business, the post-closing transition is even more important.
- In these instances, the buyer must eventually replace the seller with their own labor and skills, or must replace the seller with paid staff.
- Above all else, the post-closing transition period must be discussed directly by the principals to the deal.
- Attorneys, advisors, accountants, and brokers will not be affected by what happens after the closing.
- The buyer himself or herself will be left with the responsibility of owning and operating the business, and must gain a personal sense of trust that the seller will help him or her after the closing.
- The buyer must be assured that the seller will do whatever is necessary to assist with the transition and help the buyer succeed after the closing.
- It is therefore critical that this measure of trust be established at the buyer-seller meeting.
The Seller’s Non-Compete Should Be Addressed At Buyer-Seller Meeting
A seller of a business will normally pledge that they do not compete with the business for a period of time within a certain geographic region as a part of the business deal. This non-compete agreement is extremely important to many buyers, especially where the seller plays a key role in the business. Similar to the post-closing transition period, many buyers will want to personally hear the seller’s thoughts about the non-compete agreement and be assured that the seller will not interfere with the buyer’s business after the closing. This discussion should occur at the buyer-seller meeting, and the buyer should take advantage of this personal meeting to ensure that their concerns about the non-compete are fully addressed.
Give Martin at Five Star Business Brokers of Palm Beach County a call today for a FREE evaluation of your business.