I was recently having a conversation with a reporter where I was asked the question, “why do most business owners who sell their business end up leaving shortly after they sell?” My answer was they don’t realize what they’re getting into and once they’ve sold the selling owners often don’t like what they find.
A major part of getting someone to sell their business to you is to paint a compelling picture that you as the buyer are going to be a good steward for what the selling owner has built. Many selling owners have a legacy requirement for who they sell their business to. Selling owners want to be remembered well by their employees, the community, and others they’ve done business with.
Experienced buyers know this need and are prepared to paint a picture that looks good to the buyer. Unfortunately, many sellers never go past what the buyer has said. They take the buyer at their word and never check to see if the buyer has told them the truth.
I came to the conclusion that sellers need to do due diligence on the buyers of their business. The person that you sell your business to will check out everything you’ve said and make sure you’re telling the truth. This is called due diligence.
I believe that you as a seller also need to do due diligence on the buyer. Here are some things you might want to consider as your get ready to sell your business:
- Check out the reputation of the seller. Do they do what they say they’re going to do?
- Talk to other people that have sold their businesses to the company that wants to buy your business? How do the other sellers feel about their sale now that it’s been done?
- Find out if you have any suppliers in common. If you do ask the suppliers what their experience has been with them.
- Interview some of their employees without the buyer present. Your buyer will want to interview your employees; you should be afforded the same consideration. If the buyer does not treat their employees well they are likely to not treat your employees any better.
- Review the financial condition of your buyer. You want to make sure your buyer is financially strong and can afford the additional capital that will be needed to acquire your company.
- Check your gut. If you don’t feel like the new owner will be a good steward then follow your instincts and move on.
If you want to avoid an unpleasant surprise after you sell your business think about the important issues that could cause you buyer’s remorse. Once the deal is done you don’t want to look back and wish you did it differently.
We’ve put together a strategic activity that can help you understand what you’ll need to do to increase the value of your company and make it attractive to a potential buyer. Click on the button below to learn more about this opportunity. It’ll take some time, but no investment on your part.