There are many reasons why the sale of a business does not close successfully. What causes the sale of a business to fail? We can break these causes down into four categories. Those caused by the seller, those caused by the buyer, those that just happen, and those caused by third parties. In this article we will examine the part each of these components can play in contributing to the failed deal.
The Seller
- The seller is not fully committed. He or she does not have the willingness to negotiate nor the flexibility to see the sale to a conclusion.
- Some sellers are only testing the waters. They just want to see if anyone wants to buy their business at a price they would like to receive.
- Many sellers are unrealistic about the price of the business. They are unable to be realistic about how the marketplace will value their business.
- Some sellers are not honest about their business or situation. They may be hiding the fact that the business has serious problems. Some sellers do not disclose that there is more than one owner, or that not all the owners are in agreement about selling the business.
The Buyer
- The buyer may not have a strong desire to go into business. He or she may not have the courage to go through with the sale.
- Some buyers have unrealistic expectations about the price of the business.
- A lot of buyers are not willing to put in the hours of work necessary to operate a business successfully.
Those That Just Happen
- The buyer’s investigation reveals some unspecified or unknown problem. The buyer discovers financial deficiencies. These should have been on the table from the beginning of the selling process.
- The seller may not be able to substantiate the earnings of the business to the buyer’s satisfaction.
- Problems may arise with federal, state, or local governmental agencies.
Third Parties
- Landlords may become problematic about transferring the lease or granting a new one.
- Both buyers and sellers may receive overly aggressive advice from outside advisors. In some cases, there are so many road blocks that the deal can only fall apart.
Most of these problems could have been resolved before the selling process was too far advanced. Business brokers are aware of the various ways a deal may fall through. They resolve these issues before the business goes on the market. Buyers and sellers should follow the advice of a professional business broker to buy or sell a business successfully.