Article Review: Top 4 Missteps That Derail a Deal | Axial

By Mark Daoust, Quiet Light Brokerage | October 12, 2016

I have pared this article down to the key points.  If you would like to read the entire article, click on the link at the bottom of the summary - Eric Gall

Deals fall apart for many reasons. Some fall apart due to avoidable misunderstandings.

There’s Really Only One Reason a Deal Falls Apart

Mismanaged expectations.  Bad surprises kill deals.  As you prepare a business for sale, understand you are engaged in a process of “setting expectations.” Properly managing buyer expectations increases the chances of closing the deal.

Here are four scenarios that kill deals:

Forgetting to Disclose Elements In Your History

Example 1: A buyer discovering an undisclosed lawsuit. When discovered during due diligence, it unraveled the deal.  Even though the lawsuit was frivolous and dropped, the problem was that it had been concealed.  It broke trust.  Disclose everything!

Recent Downturns in Financial Performance

Example 2:  A business experiencing poor financial performance immediately before closing.  Many CEOs say that selling their business was more work than running the business.  Plan ahead for this downturn by expecting late nights and early mornings at the office.  Also avoid major life changes. Don't sell your business during a move, city relocation, marriage, or birth of a child. 

Opportunistic Vendors

Example 3:  Deals fall apart because of greedy vendors (suppliers, landlords, etc.) who try to change terms for new buyers.  Vendors can be opportunistic.  Some don't want to offer the same terms to someone they have no history with.

You may contact the vendor in advance.  Research backup options as they will give you leverage to negotiate the same terms for a buyer.

If not comfortable talking to your vendors before a sale, be present during the transition to help calm their fears.

Messy Processes

Example 4:  Buyers noticing habits, shortcuts and efficiencies developed by the seller and fear they may be lost in transition.  Document your processes into standard operating procedures to capture your habits, shortcuts and efficiencies.

Conclusion

Preparation and the right mindset will help avoid misunderstandings that kill deals.

Article LINK

For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com.