There are unlimited reasons
why a business sale doesn't close successfully; the many causes can
be broken down into four categories: those caused by the seller, those caused
by the buyer, those that just happen ("acts of fate"), and those caused
by third parties.
The following examines the part each of these components
can play in contributing to the wrecked deal:
In some instances, the seller
doesn't have a valid reason for entering into the sale process.
Without a strong reason for selling, he or she has neither the willingness
to negotiate nor the flexibility to see the sale to a conclusion.
Without such a commitment, the desire to sell is not powerful enough
to overcome the many complexities necessary to finalize the sales
are merely testing the waters. As detailed above, they are not at
that "hungry" stage that provides the push toward a successful
transaction. These sellers merely want to see if anyone wants to
buy their business at the price they would like to receive.
are unrealistic about the price they want for their business. They
may be sincere about wanting to sell, but they are unable to be
realistic about how the marketplace will value the business. The
demand for their business may not be there.
fail to be honest about their business or its situation. They may
be hiding the fact that new competition is entering the market,
that the business has serious problems or some other reason the
business is not salable under existing circumstances. Even worse,
some sellers do not disclose that there is more than one owner and
that they are not all in agreement about selling the business.
A seller may
decide to wait until a buyer is found and then check with their
outside advisors about the tax and/or legal consequences. At this
point, the terms of the deal have to be altered, and the buyer won't
agree. Sellers should deal with these complications ahead of time.
Nobody likes changes--especially buyers!
don't understand that almost all businesses are seller-financed.
Buyers have to be able to make the payments while still making a
living from the business. If the business cannot offer this necessity,
no one will buy it.
The buyer may not have an urgent
need or a strong desire to go into business. In many cases the buyer
may begin with positive intentions, but then doesn't have the courage
to make "the leap of faith" necessary to go through with
like sellers, have very unrealistic expectations regarding the price
of businesses. They are also uneducated about the nature of small
business in general.
Many buyers are
not willing to put in the hours or do the type of work necessary
to operate a business successfully.
Buyers can be
influenced by others who are opposed to the purchase of a business.
Many people don't or can't understand the need to be "your
These are the situations that "just happen," causing deals
to fall through. Even considering the strong hand of fate, many
of these situations could have been prevented.
A buyer's investigation
reveals some unmentioned or unknown problem, such as an environmental
situation. Or, perhaps there are financial deficiencies discovered
by the buyer. Unfortunately, these should have been on the table
from the beginning of the selling process.
The seller may
not be able to substantiate, at least to the buyer's satisfaction,
the earnings of the business.
arise, unknown to both the seller and the buyer, with federal, state,
or local governmental agencies.
Landlords may become difficult about transferring the lease or granting a new one.
sellers may receive overly-aggressive advice from outside advisors,
usually attorneys. Attorneys, in their zeal to represent their clients,
forget that the goal is to put the deal together. In some cases,
they erect so many roadblocks that the deal can only fall apart.
Most of the problems outlined here could have been
resolved before the selling process was too far advanced. There
are also some problems that could not have been avoided--people
do sometimes enter situations with the best of intentions only to
find out that this is not the right answer for them after all. These
are the exceptions, however. Most business sales can have happy
endings if potential difficulties are handled at the appropriate
Business brokers are aware of the various ways
a deal may fall through. They are experienced in resolving issues
before the business goes onto the market or before a buyer is introduced
to the business. To buy or sell a business successfully, sellers
should resolve any potential deal-wreckers, following the advice
of a professional business broker.
Although business brokers cannot provide legal
advice, they are familiar with the intricacies of the business sale.
They are also familiar with local attorneys who specialize in the
details of these transactions. These attorneys will usually be more
efficient, and therefore more cost-effective, than the attorney
who handles a general practice.