Trust During Sale and Transition

Photo by Alex Shute on Unsplash

Unlike many other transactions in life, a buyer and seller of a business need to establish trust with each other, as that trust will be called on even after the date of sale. If that trust doesn’t start during the due diligence period, a sale may even fall apart.

Contrast this with a real estate transaction, in which the buyers and sellers may never meet, even on the day of closing. They are represented by others and can close without meeting employees or learning processes.

Help in the Present

Many buyers may be owning and operating a business for the first time, so they will appreciate any kind of help they can get. Basic examples of easy connections a seller can make for a buyer:

• A resource or service to get incorporated, obtain an EIN, etc.
• Some business banks to consider, including a personal introduction to your own banker, if appropriate
• Introductions to other peers and colleagues who you have leaned on for business advice and help who may also offer some helpful advice to the incoming owner

Help in the Future

While some business owners are happy to ride off into the sunset after the transition period, never to think about or worry about their former business again, the truth is that many business owners like to know how their former company (and employees) are doing. Many really appreciate the phone call, long beyond an agreed-to contractual transition time, of, “Hey, could I run an idea by you…”

The trust and relationship behind such a phone call underline a great key to success in a business transaction: trust.

We always say that buyers and sellers are building trust not just with each other, but with everyone involved in the transaction, creating an environment of everyone rowing in the right direction. This means that buyers are disclosing everything to the bank financing the deal. This means that sellers are not hiding bad inventory or employee challenges. It means that advisors are using the right kind of communication, be it text, email, or phone calls, to move the transaction forward in a positive manner, always implying cooperation on all sides.

Checklist of Trust

So, to review, sellers should keep the following in mind:

• Share everything you can think of and even some things you might have forgotten about. Try to put yourself in the shoes of the buyer, taking into account what he/she knows about your industry and business in general and work from there.
• Be realistic. There may have been some areas you didn’t develop when you were an owner that are opportunities for the buyer. Be moderate in your claims.
• Communicate as quickly as you can. Nobody wants to be left waiting in any aspect of life, much less one of the most important transactions they can make. Try to get back to every request in a timely manner or ask for time you need (and deliver).

Buyers should keep the following in mind:

• Ask questions. There is no such thing as a dumb question in life, and certainly not in buying a business. Our advisors are here to help you with every single question you might have (and some you didn’t know you had).
• Disclose. Whether the bank is asking you for financial statements or the seller is asking you about your experience in the industry, always be transparent. There will be no benefit in hiding or withholding.
• Get help. You’re not expected to do this on your own. Use the right suite of experts, be they attorneys, accountants, or mentors, to help you with things you don’t know. If you don’t know something, go back to the previous point: ask questions.

Looking forward to working in trust with an advisor to sell your business? Give us a call today.