It's Easy To Find Reasons To Never Buy A Business

I was stunned to read today how this Icelandic volcano ash has completely thrown worldwide air travel into utter disarray, and I could not help but think how this event reminds me of what can and does happen to many who try to buy a business.

On the air travel side, thousands of flights to and from Europe and now North America have been cancelled. Hundreds of thousands of travelers are stranded. The International Air Transport Association (IATA) is making emergency plans similar to the days after 911. And, of course, the airlines are all screaming they should be compensated for the massive losses they are incurring (maybe they’ll start charging double for your bags). Isn’t that typical? Instead of looking in the mirror to discover the reasons why their businesses are a mess, they can now blame their poor performances on a volcano – perfect!

Enough pontification – how does this relate to buying a business?

Throughout the process, there will be obstacles. There will be situations where the unexpected prevails. Sellers can’t prove their numbers, customer concentration issues are uncovered, landlords won’t assign leases, financing deals fall through, other buyers come in and scoop your deal, and on and on the list goes.

With every business for sale, and in every deal, issues you never anticipated will undoubtedly surface. Expecting the unexpected is an understatement – I guarantee it will happen in every deal. The question is – how will you deal with it?

Like the throngs of lookers who never complete a deal, will you point fingers and find every reason possible why you cannot buy a business? Or, will you address each challenge and turn every rock to find a solution? If you fall prey to the former, you will never get to the finish line.

Getting back to the volcanic ash for a moment, most counties have simply put their hands in their proverbial pockets for their citizens who are stranded. Britain’s Royal Navy on the other hand has been deployed to “rescue” 150,000 stranded passengers. If you can’t take a plane then take a boat seems to be their strategy. It’s like the old successful salesperson – if he can’t get into the front door, he barges in through the window.

Every business has problems. Every deal has “hair on it”. I have long believed that the business buying process is, in itself, a test for enterprising individuals. If a prospective buyer cannot navigate their way through the process or when a “buyer” does not have the good sense to be well-prepared and educated about what they need to do, then they likely do not have the acumen or decision making abilities needed to be successful business owners altogether. If you look for a reason to be derailed in this process, I guarantee you will find it.

If however you are focused like a laser beam on getting to the finish line; you will get there.

Comments

[Leon Parker]

Richard:
When deals hit potholes and would be buyers (or sellers for that matter) start making statements about how the proposed changes or problems are really upsetting them, I always tell them to keep their eye on the ball. They want to buy (or sell) the business, that is the real objective, so lets find a workout around the problem, not let it kill the deal.

It never ceases to amaze me how upset some folks can get over what are usually very minor problems. Sure sometimes (too often) there are real deal killers that develop, but most of the time if the buyers take a deep breath and figure out what real impact the problems have we can get on with it.
Leon

[Lance Klosterman]

Maybe the airlines should give money back to people since this saved them from their usual losses. lol

[computer contractor]

The biggest deal killer is sellers unwillingnes to prove/justify their numbers.

[A Toronto, Ontario Business Broker]

I tell my clients (both buyers & sellers) that no deal is perfect. Buyers truly need to have the "stomach" to cross the finish line on a deal. There are too many pitfalls to mention but here are a few: seller is unreasonable, bank is unreasonable, lawyers & accountants are unreasonable... (you get the picture). That being said, buying a business is clearly not for everyone and I am convinced that the process is the way it is as a sort of survival of the fittest. If you have the capacity to make it through a sale you'll probably be successful after it! Please take this comment with a grain of salt~ Good post Richard.

[Rockwell Marsh]

This is a very important topic and really should be explored fully in many directions. A book could be written about it. True enough many people will self destruct when trying to do their first deal. Or even second and third.

The biggest obstacle to the deal can simply be money. Most individuals are undercapitalized when doing a deal. So the obvious bailout points are when you have to fork out front money to brokers, lawyers, accountants and banks. Not to mention down payment capital. So the money aspect can usually provide four or five very likely opportunities for the buyer to exit.

And when a buyer gropes for reasons to kill the deal it may simply be an excuse because the money factor is starting to weigh in. This is especially true for individuals who have nobody to share the expenses and risk with.

Indeed years ago I may have blown the first four or five attempts to buy companies because I was skittish about spending the up front expenses (much less the rest of the capital). I found plenty of reasons to bail out. It was only later that I became extremely careful about managing the expenses along the way.

One of my first successful deals came when I had to raise $700,000 cash, no paper no nothing for a corporate subsidiary being dumped. No I did not have the money. But there was nothing else stopping me. I didn't have any lawyers, accountants, just had to raise the cash. It made it easier because I just had to get one bank on board. After a mad scramble and a drop dead closing date it got done. How many times was I ready bail out of this one? Plenty.

[Kim]

When we were looking to buy a business, I couldn't believe how many sellers couldn't prove their numbers. Even for the business we ended up buying, the numbers we were told were not even close to the actual. BUT, we are still having a lot of success with the business. A buyer must do their "due diligence" and then jump in!

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