Business brokers from all across the United States were asked what issues caused their deals to fall apart, and instead of a wide range of reasons, the same few came up time and time again. It can be very difficult to get a business deal all the way to the closing table, but knowing ahead of time what types of problems might derail your deal can help you to avoid them. What follows are a series of articles about the major deal-killing culprits and how you can avoid them in your own business transaction

Deal Killer #1: The Seller Tries to Hide the Skeletons in the Closet

Everyone who is trying to sell their business wants to get the most money possible out of the deal, and for some, the fear of full discovery can lead to some sneaky behavior. Even though every business has some sort of skeleton in the closet, some owners might fear that disclosure will leave their failings as an owner exposed – never a comfortable proposition.

Due diligence occurs when a prospective buyer makes an offer on the business that the seller agrees to. The buyer then gets to peel back the exterior and get a really good look at the business’s books. This part of the selling process is not a problem if you are someone who was upfront about the reality of the business from day one. If you have disclosed everything and all, then there is no reason for concern.

However, if a seller tries to hide a flaw in the business (like a pending lawsuit, like the actual gross earnings, like an outstanding bill with the department of revenue) this flaw will more than likely come to light during the due diligence process.

Big or small, an attempt to hide anything from a buyer leads to mistrust in all aspects of the business, and often ends in a dead deal.

If you are a business seller, do yourself and your business a favor and be upfront from day one. All businesses have issues of one sort or another, and they are often something a buyer could deal with during the transaction – so long as they don’t find out about it on their own.

If you are a buyer, use your due diligence period wisely, as it will be your only chance to find any issues that were not presented to you. Seek professional advice from your business broker or your business transaction CPA if anything seems out of place.

Are you a seller who is afraid that revealing the issues within your business will keep it from selling? Are you a buyer who wants to know what red flags to look for during due diligence? Please leave us a comment or question here, and we will be happy to address any concerns you might have.

Want to read Deal Killer #2: The Business is Overpriced? Click Here.

Want to read Deal Killer #3: The Buyer, The Seller (Or Both) Take Issues That Arise Personally? Click Here.

Want to read Deal Killer #4: Buyers and Sellers Grow Impatient With The Deal and With Each Other? Click Here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com