BCA

Business Counsel Associates
Subscribe

5 Tell Tale Signs to Know if you're buying a Good Business From a Business Seller

September 18, 2009 By: azjogger Category: Financial, Management, Operations

ByTed E. Sanders

When buying a business there is really no way to tell if you have gotten the deal you expect from the seller until after closing. You can do all the due diligence in the world and the seller could still be hiding major latent defects. Heck, unless you can tell the future you really don’t know the outcome of your business purchase until after closing. Due diligence, research, and a proven management team help increase your chances of success, but they don’t guarantee it. I’ve found after good and bad experiences in buying businesses you can actually read the sellers by closely studying how they react close to closing. Please be aware that these “telltale signs” by no means should be considered a substitute for due diligence, however if you see these signs you know you may have a good seller.

1. The seller repeatedly expresses concern over the employees – I’ve worked with some business sellers that frankly do not care about the employees. I’ve also worked with some business sellers that are selling the business because they want what’s best for their employees. If the seller is seriously concerned about the status of the employees that is a GOOD sign.

2. The seller has remorse shortly before closing – If the seller begins to seriously question the sale before closing then you may have a good deal. I had a really bad experience where the seller was trying to get to the closing table faster than we were (the buyers) because the bank was about to call the credit lines due.

3. The business broker has done a large carry back of a commission – Any experienced business broker is going to try to get as much cash down on a business sale as possible. The logic behind this is that if the buyer (you) chooses or is unable to fulfill your obligations on the purchase then obviously the business broker may never get paid. An experienced business broker that has enough faith in the buyer to carry back a large portion of their commission contingent on the buyer’s completion of the purchase is a GOOD sign.

4. The seller continuously negotiates the post closing priorities- I feel have the business seller involved post closing through a carry back of the purchase price or involved in management (either permanently or temporarily) is imperative for your success. If the seller’s first priority is to get as far away from the business as possible, you may want to double check everything. At times sellers will use retirement or new ventures as a reason to get away from the old business. This doesn’t mean the seller has done anything fraudulent; however you may want to make sure you have all the accurate contact information for them.

5. The seller cries at the closing table – I’ve never personally experienced this, however I heard this from another business buyer. He stated that the seller felt more attached to his business than he did his own children! Handing the business over to a new owner was definitely an emotional process for this seller.

Do you want to learn more about how to buy a business? I have just completed a brand new guide in buying a business “The Corporate Raider’s Guide to Creatively Financing Your First Business.” Download it free here: http://www.corporateraidersguide.com

Tags: , , ,

No Comments →

Want That Big Contract? A Partner Can Help You Get it

September 17, 2009 By: azjogger Category: Management, Operations

By John Riley

All too often small companies hesitate to quote on large contracts because they don’t feel they have the capabilities or resources to fulfill the requirements.  That may be true, however partnerships can be the solution to grow when all other avenues offer limited opportunities.

 Management attitudes toward competitors in the past have created barriers to keep competitors at a distance .  Not any more. Today, the word is connectivity and building a more formidable means to sustain competitive advantage.  This process broadens the executive’s view so she/he can scan the horizon for larger business opportunities rather than focusing exclusively on the smaller niche markets.

 Transitioning to a business partnership starts when a large purchase requirement  appears  and you want to pursue it.  That’s when the capabilities and resources needed to  handle the order are defined. Once the requirements your company can provide are noted, the balance of capabilities and resources are what a partner will need to provide.

 For example, one partner may have special skills in software and hardware selection and compatibility. The other partner may have expertise in managing computer networks worldwide.  The combination of skills significantly elevates the partnership’s  qualifications beyond either company’s individual capabilities.

 Another example could be a public relations firm and an advertising agency.  

 Values are very important to a successful partnership. There needs to be an exchange of views to make sure there are no conflicts that might disrupt a good working relationship. Occasionally, this is an area overlooked by business owners and executives in forming partnerships, joint ventures and mergers and when that happens, problems occur frequently.

 Another area where understanding and agreement is necessary is defining  the purpose of the partnership.  Usually partnerships, like joint ventures and mergers, are undertaken for more than one reason. To avoid working  at cross purposes, the potential partners need to discuss what they want to gain from the cooperation.  If there isn’t agreement, then its best to start looking for another partner.

 The confidentiality of information shared in the partnership needs to be protected. A confidentiality agreement should be consummated between the two companies early in the discussions.

 Sometimes one or both partners will take for granted who will do what if they get the contract they are pursuing. That’s a bad idea. It’s important to determine the responsibilities of each partner at outset of discussions. 

 Properly structured, partnerships can be very effective, save time and increase productivity.  In effect,  partnering gives you competitive advantage by accessing your partners skills and resources.  Don’t overlook this avenue to growth.

Tags: , , , , ,

No Comments →