By Jason Alan San Fernando Valley Small Business Broker June 9, 2012 Los Angeles, California
Standards and Practices In a Business Transaction – Following these guidelines could improve your chances of completing the sale or purchase of a small business.
Be that guy not THAT GUY!
The following are helpful hints to help relieve the pain, panic and pressure of buying or selling a small business.
Time kills all deals!
Always do as you say and follow through no matter what on time, every time.
If you say that you’re going to return a document by a certain time or perform any task by a certain point always follow through, showing up to appointments on-time is helpful too. The stress and anxiety caused by not following through or delivering by a promised time could cause a deal to completely collapse without warning. People like to know that you’re dependable and trustworthy, this can prove even more important if there is a element of seller financing involved in the financing of the transaction.
Have the business looking good so that it shows well.
Although business brokerage isn’t like residential real estate your business still needs to show well for potential buyers. If you smoke cigarettes please try and do it outside and keep the businesses from having unpleasant odors which can be offensive. You’d be amazed at how far a few sprays of Fabreeze will go!! You don’t need to go out and remodel the entire business, but basic things like keeping everything fragrant and the floors and surfaces clean will add to the overall first impression of the business when a buyer comes for an on-site visit. Remember, you don’t get a 2nd first impression.
Advisors all in or all out!
If you’re going to have a 3rd party giving you advice like a CPA, attorney, or friend make sure that they are involved in all emails, phone calls, and meetings and/or at the very least make sure that they have all of the facts. It’s very easy for advice to cause confusion among buyers and sellers causing additional stress on the transaction which can lead to potential catastrophe.
Never act on your emotions
Check yourself before you wreck your deal!
It’s easy for our emotions to get away from us. When feeling stressed or anxious don’t send that angry email or don’t make that frustrated phone call to the buyer, seller, or broker (depending on your position) as it probably won’t help the deal in the short or long term so you’re usually better off keeping it to yourself entirely or waiting until you are thinking with a clear mind.
When in doubt talk it out!
Instead of acting hastily or emotionally, If something is troubling you with the transaction at any point it’s important to get it off your chest because letting it fester will only lead to unnecessary trouble in the form of a emotional volcano destroying everything in its path including your deal. Call your broker so that your concern can be addressed quickly and efficiently. Keep in mind your broker is experienced in how to mediate problems as they arise and will keep the deal rolling and emotions calm.
A lean compromise is better than no deal at all.
You’re not the only one and it’s not all about you, so take your ego out of the deal!!
In a business transaction it’s always important to take into consideration the other party involved. Don’t let your ego take over and puff your chest out at the other party just for the sake of being right or winning. Compromise and negotiation is the name of the game in most cases. When people work together deals get done and when they dig their heels in, transactions of all sizes have a tendency to fall apart. Compromise is the cornerstone of any good deal.
Negotiate in good faith.
Your word is your bond. When making an offer to purchase a business, make an offer based on your comfort level and what the business seems to be worth and proves to be worth. Don’t come in with a ridiculously low offer compared to the asking price because it’s insulting and ultimately a waste of time.
Don’t offer full price unless you plan on paying full price or in other words don’t go into the deal with the intentions of renegotiating the deal from the onset after due diligence. Keep in mind that sometimes a price adjustment is necessary after reviewing the details of the financials, which is fine and at that time appropriate. The above strategy of this type of offer, more often than not will backfire and create a level of discomfort for everyone, which leads to a difficult transaction or worse, no transaction. This all could have been avoided if the Buyer had considered the offer process properly from the start. Discussing the offer strategy with your broker is always a good way to begin. Often your broker will have certain insights and/or information into the other party involved, (Buyer or Seller) which can be helpful in how you play your strategy when constructing the details and terms for the transaction.
Skin in the game.
Buying or selling a business with seller financing
There are many benefits to seller financing for both the buyer and seller of the business. Most importantly, even if it’s just a small amount it generates confidence in the buyer which helps nurture trust in the short term during negotiations and in the long term success of the business. From a Sellers perspective, assisting the buyer in financing can be a wonderful way to help elevate immediate tax implications and help to push the “cash in pocket” amount up in the event interest on the amount financed is added to the principle.
Buyers shouldn’t expect sellers to finance more than 50% (and even then, that’s a lot and not very common). Depending on their direct experience, how strong their offer is, and the length of the financing requested this can be a win for all.
There are many many details in structuring a seller financing note, which your broker can assist you with along with your tax and accounting professional. Seller financing can be a wonderful tool if utilized properly for everyone in the transaction.
Be THAT guy…
Be that guy who follows the above advice and makes it a smooth transaction.
Don’t be THAT GUY who acts a’fool and goes off willie nillie with unrealistic demands and expectations, be that guy that follows the above and makes it a smooth and easy transaction for himself and everyone involved.
For more information on buying or selling a small business contact Jason Alan, California Business Broker 818-523-7456 or email email@example.com
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Fore more information contact Jason Alan, San Fernando Valley Small Business Broker 818-523-7456