Avoid selling your business to Dr Jekyll
Want to avoid selling your business to Dr. Jekyll? We’re all familiar with the story about Dr. Jekyll and Mr. Hyde; the person with two completely different personalities. Just as there are different types of buyers with different motivations, there are also buyers with different types of personalities. If you’re planning on buying a business or if you own a business that you want to sell, here are some Dr. Jekyll “traits” that would discourage the other party revealing too much information about their business.
1. Job Seeker
Try to establish this one early on as they are a complete time waster. Asking for a financial statement generally takes care of them. They have no money and no ambition. They don’t like their current job so if they find the perfect business with zero down payment, they will be made. There are quite a few job seekers out there so flush these out early.
2. Investor Using Other People’s Money
The investor is the person using other people’s money and presents themselves as a cash buyer or leader of an investment syndicate authorized to buy a viable business for sale. Once again they can be a time waster so isolate them quickly. The best way to do that is by either requesting a financial statement or request a meeting of all parties that are investing in the business. If the investor lives interstate or overseas you have your answer – would you lend money to a friend or family member to buy a business you will rarely see?
This person generally has a couple of traits. Often they love to talk and have fairly strong opinions; which can give them credibility, but they present themselves as the person which is going to buy the business to turn it around and keep the jobs of all the employees. The quickest way to isolate this one is to ask for a financial statement as chances are they won’t have any money.
4. All Cash
The all cash buyer is tricky because you so want to believe they are genuine and that your business is the perfect match for them. They know this, hence the reason they claim to be a cash buyer. However, all they do is waste your time because the cash doesn’t exist. If they had that much cash, they would use that money to buy a more expensive business that produces a greater cash flow.
One of the all cash buyer’s tricky behaviors is to convince you that they are genuine and then use the lure of being a cash buyer to reduce your price. It is very easy to flush this buyer out—simply ask for a verification of funds and make sure the proof is an original document—not a photocopy. It is perfectly fine that they redact the account number or other sensitive information.
This one is really easy to identify: lots of talk, lots of promises and seemingly the perfect buyer (similar to the all cash buyer). But the obstinate buyer refuses to sign the confidentiality agreement. The solution to this one is really simple. Move on and don’t waste any more time with them. If someone refuses to sign a confidentiality agreement, imagine how difficult they will be when you are getting into detailed negotiations.
If its time to sell your business, understand what’s involved so you can follow the process. There are many steps in selling a business and to protect your business asset, make sure you do things correctly. This includes getting the right professional help at the right point in the transaction.