These tips are for professional advisors and agents who work with those who buy and sell small businesses. This information is intended to assist in making more efficient and profitable deals.
Buyers reading this: What you read here is what sellers and brokers want to know about you, and so does a Business Buyer Advocate ®, for if you’re not ready, willing and able to achieve a win-win done deal, the only sellers that will talk to you are probably looking for a greater fool to take over their lousy business.
Worthwhile advisors, brokers, and dealmakers for buying the right business know the attributes for the most likely buyer who can achieve a done deal. These attributes differ given the characteristics of the business for sale, its industry, and the local economy. And what the seller wants to accomplish.
So, buyers, it’s up to you, during initial show-and-tell, to demonstrate your qualifications to buy and to successfully operate a particular or similar kind of business.
Street-Smart Business Investment – Qualifying the Buyer
“Qualifying the business buyer” means a seller should ask these questions of a buyer:
- Show me your money.
- Show me your experience.
- Show me your motivation.
- Show me your urgency.
- Show me your personality.
What buyers say determines what comes next and it affects the process and results of buying a business. Being coy, evasive, or dishonest wastes everyone’s time. And it can also waste the wannabe buyer’s money.
Zero in on buyer needs and wants:
- Fish for what’s gone wrong and why during the potential buyer’s working life.
- Ask for the buyer’s reasons for and against buying a business.
- What will occur if you don’t buy a business?
- What would it take for you to pull the trigger?
- What would it mean to you if . . . ?
Advisors play to “win-win”:
- Serving buyers would not be the same as serving sellers. If you don’t know the difference, learn, and then serve.
- Don’t waste time or money on unqualified buyers, or jerks.
- Explicitly agree on who does what and when: The buyer and members of the advisory team!
- Avoid conflict of interest.
- Don’t disrupt the rest of your business activity.
- Access the best businesses for sale – only; doing so is the safest and most profitable for buyers, and it reduces your risk.
Post-Acquisition Best Practices – Manage a Company
Business buyers are more likely to assure their post-acquisition success if one of the first things they do is Post-Acquisition Due Diligence. What they discover will help them with Post-Acquisition Planning & Management.
Post-Acquisition Due Diligence
What a buyer bought is generally not exactly what the buyer expected to buy.
Time is of the essence because the buyer’s recourse against the seller is best-pursued as soon as possible after closing the buy/sell transaction.
Revisiting a few elements of the business acquisition transaction can help the new owner know what he has and what he can do about it.
The buyer sees and hears the rest of the story once inside the company with full access to its records.
The rest of the story also arises during post-acquisition planning and interviews with the company’s customers, employees, landlord, bank (sources of financing), and suppliers.
Street-smart new owners follow specific steps to confirm and discover what they bought. Post-Acquisition Due Diligence is the first thing the new owner does during Post-Acquisition Planning & Management.
Post-Acquisition Planning & Management
Post-Acquisition Planning & Management is the response to this question: You bought it – now what?
Some of the most common and valuable tasks after acquisition include establishing:
- Goals and Objectives
- Pro Forma P&L and After-Tax Cash Flow
- Financial Guidance
- Securing Intellectual Property
- Public Relations
Post-Acquisition Planning & Management is also known as Post-Acquisition Integration Planning & Management or Post-Deal Integration. Your checklist to minimize business risks includes:
- Researching the competition and marketplace, including industry ratios comparison
- Creating strategic alliances
- Strengthening relationships with customers, employees, lessors, sources of financing and suppliers
- Profit enhancement by devising ways to increase revenue and decrease expenses
- Reporting about the changes occurring during the transition
Ted J. Leverette
The Original Business Buyer Advocate ®
“Partner” On-Call Network, LLC
Email Ted J. Leverette, The Original Business Buyer Advocate ® Since the 1970s.
“Partner” On-Call Network, LLC