While there are few givens in business transactions, here is one: the presumed buyer of your business will not know as much about your business at closing (or even for months thereafter) as you – the owner-seller – know right now. This means that the successful business buyer is taking a real leap of faith when he buys your business. If there is even a smidgen of distrust of the seller, most business buyers will get cold feet well before the closing table and will walk away from the purchase.
So what does this mean to you, a business owner? When it is time for you to sell your business, first visit with your trusted advisor(s) such as business broker, attorney, CPA, etc., to discuss candidly about how a potential buyer of your business may perceive you personally. If you are an introverted individual, you will need to practice candor and openness as you work at being proactive with potential buyers. From a buyer’s standpoint, there is nothing better than a seller offering unsolicited information about an unconsidered (by the buyer), but important, facet of the business. Conversely, there is nothing worse than a buyer hearing “well, you didn’t ask me” from a seller when the buyer, after discovering some negative developments on his own, queries the seller, “Why didn’t you tell me this?”
A seller with an outgoing personality can encounter problems on the other end of the spectrum. There is such a thing as too much information whereby the seller proactively overwhelms the buyer with such a quantity of facts, figures, data, anecdotal evidence, etc. that the buyer gets confused and as a result feels unworthy of taking the helm of your business. The end game under this scenario is of course no sale…a dead deal.
So a potential business buyer must have confidence and trust in the business owner-seller. The seller must earn this trust by being open about the good, bad and ugly of every aspect of his business. In two words, the seller must offer the buyer total transparency about his business. This includes both historical information and immediately sharing new developments (positive and negative) with the buyer.
If the buyer trusts the seller and the deal environment has transparency, the probability of a successful closing is greatly enhanced. In addition, the possibility of post-sale issues is minimized if the pre-sale activity has fully embraced the “two T’s.”
Contributed by Michael Greengard, Praxis Business Brokers.
Through the Michigan Chamber’s partnership with Praxis, we can guide you through a step-by-step process of the complexities, all while maintaining complete confidentiality. To learn more about valuing and/or selling your business, please contact Michael at email@example.com or 616-588-4640.