November 2010 Newsletter
November 2010 Newsletter
As we approach the end of the year and potential tax changes in 2010, I thought it a good time to bring up a long discussed topic in business: Time Kills Deals. This is not exclusive to business brokerage and I’m sure many people have discovered this in their life. For example, waiting too long to propose to your gorgeous girl friend. Sensing a serious character flaw, she found someone else who could commit a little quicker.
So let’s relate this to buying or selling businesses. Let’s say I have a buyer, Bob, who is taking his time getting due diligence done. He has a process. No problem. However, as he completes his due diligence it is revealed that he hasn’t proceeded with the bank loan application. Well the bank takes their process seriously too. Their loan committee meets every two weeks and the next meeting is in two or three days and the banker doesn’t see any way to have his request in time – so he will present at the next loan meeting. Remember, you are not his only potential client. Now, let’s add to the mix the SBA, a buyer’s attorney, insurance agent, accountant, and the financial planner to access your 401k, and oh yes, the landlord. The deal can linger for months with very little actually getting done.
All the buyers’ advisors have their existing clients and business to handle and the buyer needs to fit into their schedule (and can’t jump at your request). After 4 months of following a process and fitting in your calendar to meet advisors, the deal is starting to unravel. The seller interprets the delay as a problem with the buyer. The buyer must be “weak” financially, unable to manage a business, or maybe the buyer isn’t really serious. Although this isn’t an accurate view, this is the seller’s perception. The seller starts to look for other buyers as the negotiations grind to a halt. This is known as “Deal Fatigue”. It happens all the time and it can be easily avoided. Well, not easily. It does take time, work, and effort. But that’s business!
Urgency needs to be conveyed to all parties involved. Due dates set with follow up. Be a leader of the process. Follow these general steps: First, due diligence and bank loans should be happening at the same time. Meet with several banks – immediately! Second, gather information needed for insurance, licenses, etc. while the loan is in process. Third, when you have positive feedback from your lender, begin to negotiate terms of the buy-sell agreement. The attorneys will document what you have agreed to and will advise on technical points. While you are actively working the process, do you have access to your down payment? These steps are worked concurrently, not consecutively. By the way, don’t quit your job until you know the deal is going to close!
Stay in close contact with your Apex Business Advisor through the process. Your Advisor can assist with the communication and follow up with banks, attorneys, and the seller. Keeping lines of communication open is critical for getting to the closing table. Next month I will discuss what the seller can do to avoid “Deal Fatigue”.
Apex Advisor Search:
We are seeking a top sales executive with solid business background wanting to be part of a deal making team. If you or someone you know is passionate about helping others achieve success while earning a six-figure income, please contact me for a personal conversation.
Recent Transactions Completed:
Sod and Seed Distribution – Omaha, NE
Home Health Care Staffing – Dallas, TX
Sign Shop – Raytown, MO
We look forward to assisting in your business sale or acquisition plans. Call and talk to an Apex Business Advisor today!
Doug Hubler
President
Apex Business Advisors
“Professionals in Business Acquisitions and Sales”
