A few months ago Business Brokerage Press published a list of (longtime) business broker Tom West’s “Rules of Thumb.” I picked out my top seven, list them below, and offer some comments including how they may apply to all businesses.
“The reason for sale a seller initially provides is very seldom the real one.”
Oh so true, one of the top causes of skepticism with buyers, and applies to many things in our business and personal lives.
“The real selling price is half-way between what the seller thinks it’s worth and what the buyer thinks it is.”
Just like real estate (not in today’s hot Seattle market though where it’s the seller’s price or more), cars, and more.
“The figure the seller provides for annual sales is usually the best year the business had or even the figure the seller thinks the business is capable of doing.”
Optimism is good and often not accurate.
“The profit the business makes is what the seller dreamed up in his or her wildest dream.”
See the previous item’s comment.
“If the buyer’s wife is opposed to her husband buying a business, there will be no deal. The reverse is not true, a wife will buy a business regardless of her husband’s opinion.”
No need to even comment on this one.
“Every sale falls apart at least twice before it closes.”
Oh yeah! Especially when one party feels the upper hand (usually the seller) and starts nibbling for more and more concessions.
“By talking with every broker in town, one will discover that that they will all say that every other broker is not professional.”
I wonder how true this is. Maybe it’s not true in “we’re always nice” Seattle, but there are always industry insider opinions. I have heard many owners say they wouldn’t sell to certain competitors because they wouldn’t want those competitors taking care of “my customers,” so I guess this is a cross-industry rule.
“Whatever the problem, be part of the solution. Don’t just sit around raising questions and pointing out obstacles.” Tina Fey