Fussy Buyers & Naive Sellers

My friend Dennis Hebert with CFO Selections called recently regarding a client of his who is thinking of selling to his COO/GM. The holidays got in the way and then Dennis told me he felt they didn’t have a good understanding of what it takes to do a deal, so he gave them a redacted purchase and sale agreement. It caused them to pause and think.

Business sellers often underestimate the complexity of what’s involved in selling a company. It’s their cute little puppy so they think everybody will think it’s adorable. Even when others find it adorable there’s still a lot of work. The amount of detailed information requested by the buyer, bank, and attorneys can be overwhelming. Deal fatigue is common.

Most business people are optimistic, it’s a necessary trait, and sellers are no different. The complexity of a buy-sell deal can be extremely high and reduce optimism. It’s not like selling or giving away a cute puppy.

On the flip side, most business buyers are too fussy. I remind all buyers there are no perfect businesses and no perfect deals. Watch out for anything that looks too good.

No small business saves the world or changes western civilization. But these businesses do create jobs, wealth, and a lifestyle, for both the employees and the owner. In fact, boring is often best. Buyers need to answer the following three questions:

  • Can you see yourself going in there every day?
  • Can you add value?
  • Is it a viable business model that doesn’t violate your values?

The rest is analysis, due diligence, negotiation, etc. And, on the flip side to the seller underestimating the complexity of the process, the buyer needs to realize they can always ask another question, and they need to get over that impulse, and make a decision. As I write in the preface to Buying A Business That Makes You Rich, buyers will make a leap of faith and it needs to be off a chair not the roof.

“How desperately difficult it is to be honest with oneself. It is much easier to be honest with other people.” Author Edward E. Benson

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