Easy…Don’t get caught out..
If you get this wrong, your lack of preparation could cost you the deal…or worse, you’ll take a discount on the business sale price. Over the past 30 years + of being involved in business sales as buyer and seller personally, or as a consultant for others, I have yet to see a ‘straight forward’ deal. Someone always feels the need to play some games and usually, at the ‘eleventh hour’. It’s not that they are trying to break the deal or you… they just want to test that what you have claimed about the business is true.
Often, when I’m working with business owner coaching clients who are working through the final stages of their business sale, I inevitably get the call from them after yet another meeting with the buyers, people referring to the whole due diligence process as ‘the entrepreneur’s proctology exam’…or something worse. It’s a crude analogy but a good representation of what it feels like when a stranger pokes, prods, and questions everything about your business.
Naturally, professional buyers will try to get as much information off of you with their usual buyer’s questions. But that might just be buying time, for you to warm up to them, relax and for them to set their traps in place. When selling your business, most professional buyers will have a check-list of questions they need answered if they’re considering to buy your business. Everything from contracts, lease terms, company patents or trademarks, how much your company earns to years ahead of projections and all the other business paperwork in between.
‘I’m sure you can have all those requests for information collected and prepared?’. Easy…tick…tick…tick..
As a business seller how you can avoid some of the games..?
By preparing yourself. Knowledge is power and you can see through their games. And accepting the reality that traps like these will occur at some point in the transaction.
Here are 4 common ‘traps’ to avoid when selling your business:
Trap #1: Juggling calendars
By asking to make a last-minute change to your meeting time, a business buyer gets clues as to how involved you are personally in serving customers.
If you can’t accommodate the change request, the buyer may probe to find out why and try to determine what part of the business is so dependent on you that you have to be there.
Trap #2: Checking to see if your business is vision impaired
A business buyer may ask you as the business owner to explain your vision for the business, which is a question you should be well prepared to answer. However, he or she may ask the same question of your employees and key managers. If your staff members offer inconsistent answers, the buyer may take it as a sign that the future of the business is all in your head.
Trap #3: Asking your customers why they do business with you
A potential business buyer will most likely ask to talk to some of your customers. He or she will expect you to select your most passionate, and loyal customers and, therefore, will expect to hear good things. However, the customers may be asked a question like ‘Why do you do business with these guys?’ The buyer is trying to figure out where your customers’ loyalties lie. If your customers answer by describing the benefits of your product, service or business in general, that’s good. As much as your ego may like it…if they respond by explaining how much they like you personally, that’s bad.
Trap #4: Mystery shopping
A potential buyer of your business will often conduct their first bit of research behind your back…long before you even know they are interested in buying your business. They may pose as a customer, visit your website, or come into your business to understand what it feels like to be one of your customers.
Make sure the experience your business offers a stranger is tight and consistent, and try to avoid personally being involved in finding or serving brand-new customers. If any potential buyers see you personally as the key to wooing new customers, they’ll be concerned new business will dry up when you leave.
Business owners selling their business interest would trigger a lot of curious minds, especially those of the professional buyers’. Asking the usual or more general questions off a check-list to the more subjective ones, which can be very tricky.
So, as they say in the Scouts ‘be prepared’, when it comes to selling your business.
Experience in preparing your business for sale will cost you either way. At the start for some professional assistance, or at the end with a poorly structured/ negotiated deal.
If you would like to learn more about it or how Business Growth Leaders can help you build a more sellable business, contact our team for more information and help. Or book directly into a free strategy session to get some direct issues answered fast on your strategy.