How Do You Know When a Buyer Is Wasting Your Time?
Selling a business can be a long, complicated process. So it can be rather disconcerting when you realize that a buyer is not serious at all about your business, and is pretty much wasting your time.
They could be deceiving you for a variety of reasons, but whatever the reason, it is not funny in the slightest. You are too busy running your business to be taken in by someone only interested in kicking the tires or perhaps surreptitiously checking out the competition.
It can also make you suspicious of future “interested buyers.”
How can you distinguish between a deal-maker and a deal-faker? I asked the brokers at Quiet Light Brokerage for their tips.
“Beware of The Immediate Offer” — Bryan O’Neil
In Bryan’s experience, the biggest giveaway that you’re dealing with a tire-kicker is “when a buyer puts in an offer without asking a single question about the business or speaking to the seller first.”
You may think this behavior strange. After all, why would someone commit to a business and make an offer without researching it first? But Bryan has a simple explanation.
“This type of buyer often puts in offers with the sole intention of entering into the exclusivity period and only then begins the actual evaluation of the business — without risking having competing offers show up,” says Bryan.
If they find something they don’t like, they can then use that to justify withdrawing their offer. Or if they don’t find something, they can always make something up.
Situations like these are why it’s a good idea for every seller to have a good advisor, to ensure this doesn’t happen. A good advisor will also make sure any buyer who’s granted an exclusive LOI (Letter of Intent) is sufficiently informed about the company and can afford to go through with the acquisition.
“Instincts and Honesty Make a Difference” — Joe Valley
“After a time you develop an instinct for who is a real buyer and who is simply feeding their own ego and wasting everyone else’s time,” says Joe. He listed a few things advisors and sellers should look out for.
Buyers who exaggerate. This is easily seen through and never bodes well for the future negotiations.
Buyers who rip apart the business as a form of negotiation. This behavior will only backfire.
Novice buyers who copy and paste a list of identical questions for every business. Look for buyers who take the time to do their research and ask intelligent follow-up questions.
Buyers who are rude and condescending. Again, this behavior does not bode well for a future partnership or deal.
“Faulty Expectations Can Ruin a Good Deal” — Jason Yelowitz
“I don’t believe many buyers intend to waste the seller’s or broker’s time, but I do believe many do not have accurate expectations of how these deals work,” says Jason.
“Some mistakenly believe that they are the only ones looking at the deal and can therefore name one-sided terms. Some believe the asking price is merely a suggestion, when in reality most deals close within a reasonable range of the asking price.
“I find that a little bit of expectation-setting usually helps align the buyer, seller, and broker expectations so that all parties can take the time they need to make intelligent decisions without wasting the others’ time or trust.”
“Pay Attention to The Ones That Don’t Pay Attention” — Darin Hardin
Darin cautions sellers to watch out for buyers who clearly haven’t put the time into reviewing your business.
“They may ask generic questions — but you’ll know right off the bat they haven’t read the business summary, because what they are asking was clearly in the summary.”
Look for buyers who “treat you like you work for them” and think “that they are the only ones who matter in the deal,” says Darin.
When it comes to how to spot a time-waster though, our brokers are pretty much universally in agreement.
In summary, the main warning signs to look out for are:
Buyers asking questions when those questions have already been covered in the summary. Not reading the documents means they are not giving the business their full consideration.
Buyers being rude and demanding, and tearing apart the business you have painstakingly built over the years.
Buyers who expect the price to be lowered when you have already more or less fixed a price. This feeds into Jason’s observation of “unrealistic expectations.”
Buyers who make an offer without asking any questions first. They just want that coveted exclusivity period.
Considering a sale? We’d welcome the opportunity to confidentially review your situation, offer a free valuation of your business and offer a game plan to help you maximize your return in a sale. Contact: John McGovern, CEO, firstname.lastname@example.org, (917) 881-6563.
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