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Jungle Law #7: If A Seller Really Wants To Sell, You Probably Shouldn't Buy!
Whenever you look at any business for sale, you should approach situation with a great deal of caution. You should make it your business to verify all of facts possible about business, including determining reason for sale. There are some very good motivations for sellers to sell and other ones that are not so good. Usually, best reason for a sale from buyer's perspective is planned retirement of owner or a sale necessitated by illness. By far, best potential purchase is a long-standing single-owner profitable business where owner is approaching (or at) retirement age and is generally reluctant to sell but realizes that he eventually has to.
Jungle Law #8: 99% Of Potential Business Buyers Never Buy A Business!
This alone may be reason enough for a seller to retain a business broker to represent him in selling business. A professional broker knows how to sort through many non-qualified potential buyers to get to few who actually do have means and motivation to buy a business. Once unqualified potential buyers have been culled out, still only somewhere around 50% of these folks eventually buy a business. For this and many other reasons, I strongly recommend that sellers use a professional business broker to represent them in selling their business.
Jungle Law #9: Always Assume There Are Skeletons In The Closet!
Most businesses have some negative feature(s) that seller will be reluctant to talk about. You can be sure that any problems will come out later as buyers begin analyzing business (due diligence), and it could kill sale if problems are perceived as cover-ups. This is because buyers will ask themselves (logically) "if they hid this fact from me, what else are they hiding?" If negative aspect(s) is clearly presented and discussed with buyer, it may not be a serious problem because buyer may feel that it can be overcome, avoided, or changed. The seller should strongly consider this and determine all of possible negative factors that could affect sale of business. If problems are very serious and non-correctable, business may not be salable.
Jungle Law #10: Someone Will Always Get Cold Feet Just Before The Closing!
Closing deal is always difficult, but usually shortest part of buying or selling an operating business. After all, valuations, investigations, and negotiations are complete and now it's a matter of getting everything into writing in a form that satisfies everyone so that transfer of ownership of business can take place. However, you can definitely count on someone getting cold feet just before closing. Be prepared for this! The seller and buyer may both start to wonder if they are really getting a fair deal. The best way to get ready for this is to anticipate it happening and then to deal logically, reasonably and unemotionally with it at time.
Jungle Law #11: Negotiations Must Stop At The Signing Of The Purchase And Sale Agreement!
Once Purchase and Sale Agreement has been signed by both seller and buyer, there is an excellent chance that sale will actually take place. But, there must be an end to negotiation process or things will begin to unravel. The deal at this point is like a house of cards with many parts of negotiated deal contingent on another part. Trying to reopen negotiations after a Purchase and Sale Agreement has been signed will most likely lead to a collapse of entire deal.
Jungle Law #12: After Buying A Business, Do Not Change Anything (At First)!
Of course, this doesn't hold true if you're buying a turnaround situation; but in general, if business you are buying is profitable, leave it alone while you learn how to manage it in accordance with status quo. One of experiences I have had that best illustrates this point is as follows: One buyer of a fast food chicken franchise soon after closing changed meat suppliers because he found that he could get chicken at 10¢ a pound cheaper. What new owner did not realize was that these chicken pieces were 25% larger than those provided by original supplier. The problem with this is; franchise doesn't sell chicken by pound; it sells it by piece. The new franchise owner completely wiped out his profit margin by paying a smaller price per pound but delivering to customer 25% more chicken at same retail price!
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Mr. Russell L. Brown has been a business broker and consultant for over 25 years and has been directly or indirectly involved in all aspects of the buying, selling, brokering, and valuing of hundreds of existing companies. He is widely sought as an expert consultant and lecturer on the topic of buying, selling, and valuing businesses. http://www.BusinessBookPress.com