When a good business – one with good financials and priced reasonably – goes on the market, we get many inquiries from buyers on it. Part of our job is to screen buyers so the seller and us work with the ones that are the most likely to buy the business. Here is what we look for when we do so:
Honesty and Transparency: You are asking to receive confidential information, including financial information, about a business. You need to give us financial information about yourself so we know you have the capacity to buy the business. You need to tell us about your background so we can see how it qualifies you to manage the business. You need to sign a confidentiality agreement – and maintain confidentiality. In all your interactions with the seller and us, you need to be honest and trustworthy.
Willingness to compromise: Buying a business is not like buying anything else. It is not a smooth road. There will be times where you need to compromise on issues. Other parties – such as lawyers, landlords, and government officials — won’t get things done as quickly as you would like. You need to maintain patience and not hold the owner responsible for things the owner cannot control.
Likeability: Keep in mind that most sellers have feelings for their employees and don’t want to sell their business to someone who will treat them poorly. Also, selling a business is a process where the chance of success is greatly lowered if the other party is difficult. Keep in mind that a seller, no matter how good or bad his business, is usually proud of it. Treat him respectfully. Contrary to the stereotype of the tough negotiator getting the best deal, people usually give the best deal to people they like.
Be a CEO, not a CFO. After you sign the NDA and receive financial information about the business, you need to decide if you are still interested in the business. If so, the next step is a meeting with the owner and a visit to the business. Some buyers insist on requesting more and more information, including financial information, before scheduling this meeting. We see this as a sign that they are a CFO, not a CEO, someone who will analyze the purchase to death, but not be a person who takes action and buys the business.
Communicate: if you are going to close on the purchase of a business, there will be a lot of communication with many parties. If you don’t return our emails and phone calls, we are likely to conclude that getting a deal done with you is going to be difficult and may be harder than the seller and us want.
These are just some things we look for in a buyer. Keep these in mind when you are looking at a business to buy.