In many cases, the Buyer and Seller reach a tentative agreement on the sale of the business, only to have it fall apart. There are reasons this happens, and, once understood, many of the worst deal-breakers can be avoided. Understanding is the key word. Both the buyer and the seller must develop an awareness of what the sale involves--and such an awareness should include facing potential problems before they swell into floodwaters and "sink" the sale.

What keeps a sale from closing successfully? In a survey of business brokers across the United States, similar reasons were cited so often that a pattern of causality began to emerge. The following is a compilation of situations and factors affecting the sale of a business.

The Seller Fails To Reveal Problems

When a Seller is not up-front about challenges in the business, this does not mean the difficulties will go away. They will turn up later, usually sometime after a tentative agreement has been reached. The Buyer then gets cold feet and the deal falls apart.

No one appreciates surprises in the midst of a business transfer. Sellers must be as open about the challenges within their business as they are about the advantages and rewards. At OKBB, we can handle most problems . . . if we know about them at the start of the selling process. At OKBB we try to ask every key and pertinent question from the Seller that a Buyer might want to know, before we package and offer the business for sale.

The Buyer Has Second Thoughts About the Price

In some cases, the Buyer agrees on a price, only to discover that the business will not, in his or her opinion, support that price. Whether this "discovery" is based on intuition or a second look at the figures, it impacts seriously on the transaction at hand. The deal is in serious jeopardy when the Seller wants more than the Buyer feels the business is worth.

It is of prime importance that the business be fairly priced. Once that price has been established, the documentation must support the seller's claims so that Buyers can see the "real" facts for themselves. At OKBB we strive to verify that every offering we package has sufficient cashflow to service the contemplated debt and provide a Buyer with salary and benefits.

Both the Buyer and the Seller Grow Impatient

During the course of the selling process, it's easy--in the case of both parties--for impatience to set in. Buyers continue to want increasing varieties and volumes of information, and Sellers grow weary of it all. Both sides need to understand that the closing process takes time. However, it shouldn't take so much time that the deal is endangered. It is important that both parties, if they are using outside professionals, should use only those knowledgeable in the business closing process. Most are not.

OKBB is aware of most of the competent outside professionals in a our business area, and these should be given strong consideration in putting together the "team." The Seller and Buyer may be inclined to use an attorney or accountant with whom they are familiar, and while these professionals may be competent in their "field" they may not have the experience to bring the sale to a successful conclusion. Bringing the transfer of a business to a successful close IS our field of expertise at OKBB.

The Buyer and the Seller Are Not (Never Were) in Agreement

How does this situation happen? Unfortunately, there are business sale transactions wherein the Buyer and the Seller realize belatedly that they have not been in agreement all along--they just thought they were. Cases of communications failure are often fatal to the successful closing. OKBB is skilled in making sure that both sides know exactly what the deal entails, and can reduce the chance that such misunderstandings will occur.

The Seller Doesn't Really Want To Sell

In too many instances, the Seller does not really want to sell the business. The idea had sounded good at the outset, but now that things have come down to the wire, the fire to sell has all but gone out. Selling a business has many emotional ramifications; a business often represents the seller's life work. Therefore, it is imperative that prospective Sellers make a firm decision to sell prior to going to market with the business. If there are doubts, these should quelled or resolved. Some Sellers enter the marketplace just to test the waters; to see if they could get their "price," should they ever get truly serious.

This type of Seller is the bane of business brokers and Buyers alike. OKBB generally can tell when they encounter the casual (as opposed to serious) category of Seller during the Seller interview. Our Buyers deserve the right to know that when they come to OKBB, every business offering we have is packaged right, priced right, and involves a motivated Seller. Unfortunately, an inexperienced Buyer may not recognize the difference until it's too late.

Or...the Buyer Doesn't Really Want To Buy

What's true for the Seller applies to the Buyer as well. Buyers can enter the sale process full of excitement and optimism, and then begin to drag their feet as they draw closer to the "altar." This is especially true today, with many displaced corporate executives entering the market. Buying and owning a business is still the American dream--and for many it becomes a profitable reality. However, the entrepreneurial reality also includes risk, a lot of hard work, and long intense hours. Sometimes this is too much reality for a prospective Buyer to handle. During the Buyer interview OKBB will assess a Buyer's willingness to complete a business transfer before disclosing business listings.

And None of the Above

The situations detailed above are the main reasons why deals fall apart. However, there can be problems or unforseen events beyond anyone's control. Many potential deal-breakers can be handled or dealt with prior to the marketing of the business, to help ensure that the sale will close successfully.

A Final Note

Remember these four components in working toward the success of the business sale:


1. Good chemistry between the parties involved.
2. A mutual understanding of the agreement.
3. A mutual understanding of the emotions of both the Buyer and the Seller.
4. The belief, on the part of both the Buyer and the Seller, that they are involved in a good business transfer.

Copyright 2002 BBP

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