It is an all-too-common event for buyers and sellers of a business: the deal falls apart. After both parties have reached a tentative agreement on the sale of a business, it is emotionally and financially frustrating to watch a deal disintegrate before everyone reaches the closing table.
Why does this occur, and what can be done in advance to help prevent such a scenario? Business brokers across the country generally agree the following are the three top reasons businesses don’t sell.
Issues with pricing
Business brokers consistently encourage sellers to be realistic about the asking price of their company. A business is fairly priced when its financial records support the value perceived. During due diligence, the buyer has the opportunity to review the company’s financial data prior to closing. It is best not to give a buyer any reason to feel the original asking price was inflated.
A troublesome issue is not disclosed
Sometimes sellers feel a challenge with their business is best not disclosed initially. This represents the potential for a deal falling apart quickly down the line. Most problems will eventually surface; we all know they don’t simply disappear overnight. Once a potential buyer (either before or after an offer is made) learns about the problematic situation, what could have been handled easily becomes an off-putting surprise. The buyer feels misled – and who can blame him?
Time can easily kill a deal
This is a common observation among business brokers. Part of the value of using a business broker comes from his experience in managing the business transfer process and keeping all parties focused on the same goal. This is an emotional time for both buyer and seller, and it’s understandable that one or both can become irritated, defensive or critical when time drags on with no resolution. The closing process does take time – and certainly some deals are more complex than others. Using knowledgeable and experienced professionals will help ensure the process moves forward seamlessly and to everyone’s satisfaction.