After working with potential business buyers and sellers for over thirty years, one of the most common complaints I hear is about business brokers. It’s common for buyers to complain about the theory that business brokers don’t respond to inquiries, that they want an offer before providing meaningful information, that the add-backs they’re proposing make no sense, and the list goes on.
Yes, indeed, it is true that many brokers are guilty of these violations, but certainly not all of them. More importantly, buyers play an equal, if not greater, role in the shortcomings of the business buying process.
Understand their role
Business brokers do not represent buyers; unless they are hired and paid by them. They represent the seller or the deal. They are not your advisor. Their role is to provide information, answer questions, act as a buffer between the parties and move the deal forward. They’ve done this before and so they understand the process. They know how to reach the finish line. Furthermore, there are cases where the seller has instructed them on what they are or are not willing to provide to buyers and when.
For many buyers, the only comparable scenario they can relate to when buying a business is the experience they had buying a home. The real estate agent probably held their hands, happily took them to the one ad, and called a bunch on their behalf. This is not how corporate brokers work and for good reason. When a broker has a potential buyer, outside of unforeseen circumstances, the majority will make a purchase. When it comes to companies, less than 10 percent of people who look for a company ever make an acquisition. As such, brokers must be discriminatory. This is no excuse for unprofessionalism. However, it is the reality. There are many excellent brokers and many terrible ones, which leads us to the next point.
Separate yourself from the crowd
The success or failure of a buyer is up to the buyer, not the broker. You have to get the situation under control. The broker is a channel to close the deal. They play a role, but cannot determine your future. They want to make a deal just as much as a buyer, if not more. After all, if they don’t sell the company, they don’t get paid.
Your knowledge, or lack thereof, of the various stages in the business buying process is what will determine the outcome. If you have never bought a business before, regardless of your ability to possibly run a business, the first step is to get an education. How on earth can you expect to make such a crucial decision if you don’t have a certain level of expertise? Besides, why would anyone want to make a decision of this magnitude without having as much knowledge as possible?
What you know will help you; what you don’t know will kill you. If you don’t have a wealth of experience buying a business, get educated on every aspect of the buying process. If not, you are likely to become another one of the ninety percent plus who never completes a trade.
During the first step of the process, when buyers inquire about a business for sale, for example, and particularly through the online marketplaces, they should be aware that estate agents can be inundated with questions about some listings. Submitting generic requests without context or background will not be effective. A buyer’s inquiry should clearly indicate that you:
- an immediate timeline to buy
- the resources to complete an acquisition
- full intent to perform an NDA to receive additional information
This is the ultimate marathon, not a sprint
The business buying process takes time. There are logical steps to follow. All the information a buyer needs to decide whether to proceed will be provided at the right time. If not, that alone helps make the decision to run away easy.
In my experience, the most important trait successful buyers possess is the ability to build trust and engage in effective dialogue with the seller and their representative. The reverse also applies to the selling side. In almost all cases, when a buyer and seller trust each other, and the buyer wants to buy and the seller wants to sell, it is almost impossible to stop them from closing a deal.
There’s no point in hanging up or arguing every issue. You’re not going to win every point; that strategy gets old fast. While the concept of a win-win scenario sounds wonderful, it is not realistic. The goal is that both parties are reasonably satisfied. Just as no company is perfect, no deal is perfect.
Make the journey easy
Good companies sell fast, regardless of the economy. By being a well-educated buyer, demonstrating that you are serious, having thoughtful discussions with empathy for the seller’s concerns and pain points, and approaching interactions with seller and broker with the understanding that certain steps must be followed , you will find that the process must be followed. more effective in almost all cases.
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