The first thing you should know if you are buying a business is that you are competing with many other buyers. It is not unusual for the seller of a good business to receive multiple offers. Here are some tips on what not to do if you want to buy a business.
- Don’t breach confidentiality – Loose lips sink business deals as well as ships. The seller and business broker will be very unhappy with you if you don’t keep the information you are given, and that the business is for sale, confidential.
- Don’t be dishonest – You expect the seller of the business to be honest with you and the same is true of you. Don’t misrepresent your financial situation or background. Be honest in what you say and do. Keep your word.
- Communicate – Respond to phone calls and emails from the business broker even if you are not interested in the business. It will show the business broker that you are a serious buyer. It is common practice for experienced business buyers to let us know what they think about a business for which they receive a Confidential Business Review even if they are not interested. That’s because they want us to keep them in mind on the next deal.
- Treat sellers, and their businesses, with respect. Sometimes business buyers find fault with the business to negotiate for a better deal. Be careful. Most sellers are proud of their business. There are other ways to negotiate for a better deal.
- Show interest by actions, not words. Take the time to meet with business brokers and business sellers. It gives you a chance to develop a personal relationship and shows that you are a serious buyer.
- Don’t apply for a job. The seller is not impressed by your resume. You are buying a business, not applying for a job. You want to act like a peer to the seller which you don’t do when you present a resume.
- BE a CEO, not a CFO. We understand that you, or an adviser or accountant, needs to analyze the numbers. But, a business is much more than just the numbers. Get out of your office, visit the business and meet with the owner. This will tell you a lot about the business and the seller.
Hippocrates said to do no harm. The same is true of buying a business. If you follow these 7 simple rules, you are likely to avoid the major mistakes that some buyers make.