Buying A Small Business: What Sellers Say About Buyers Behind Closed Doors
When it comes to purchasing a small business, there are a few things Buyers need to understand. Here at DealBuilder we have helped over 300 business owners sell, and as their trusted confidant, we've heard all their unfiltered thoughts during the process.
Here's what Sellers are saying about Buyers behind closed doors.
Pitch Seller Financing Differently
"Why would I loan them money, I'm not a bank! Sounds like they aren't legit they don't have the cash."
When a Buyer is looking to purchase a small business, it's important to avoid making the offer sound like a loan. Sellers hate VTBs (Vendor Take Backs), so it's better to position the offer as a bonus to the price.
Include Training in the Offering
"Why would I include training in the price? I didn't get any training when I started the business!"
When buying a business, you are not going to be able to start on the first day knowing everything there is to know - there needs to be some handover involved. It's important for Buyers to include training in the offering, as Sellers like to be paid an hourly rate for the training they provide. Even if it doesn't make sense, including the training in the offering can make all the difference in a Seller accepting the offer.
Don't Overlook Working Capital
"What is this working capital clause? When I started the business I had to use my LOC!"
NWC (Net Working Capital) is often lost on most clients, so it's important to educate them on the importance of this clause. It's best to calculate NWC on your own and reduce the offer accordingly.
"This LOI has a refundable deposit, so what recourse is there if they pull out at the 11th hour?"
When it comes to avoiding the Buyer pulling out of the agreement at the 11th hour, it's important to build personal goodwill with the Seller. The more trust you develop with the Seller, pre-LOI acceptance, the better. Remember, the Seller wants to sell their business just as much as you want to buy it, so creating a trusting relationship with them is only going to benefit you in the long run.
Be Careful with Access to Client List
"They can't access my client list, what if they steal my clients?"
Buyers need to be careful when requesting access to the Seller's client list. It's best to start with small requests and only ask for the detailed list near the end of the Due Diligence process.
When it comes to buying a small business, understanding the Seller's concerns and building goodwill is key. Start with small requests, understand some irrationality may come up, and remember that the sale process is a big deal for the Seller. This is a big (if not the biggest) transaction in their lives, so they may have some reactionary emotions.