What To Do With Skeletons: How Business Buyers Should Deal With Due Diligence Issues



If you are looking at buying a business, then the due diligence step will be in your future. This part of the business transaction process occurs when the seller accepts your initial purchase offer. Due diligence is important because it gives you a chance to peek behind the scenes, scour the books and dig up any skeletons lurking in your future business before you sign on the dotted line.

 

One open drawer reveals skeletal bones that were previously hidden.

 

Wait, skeletons? What should I do if I find potential problems during due diligence?

 

First of all realize that it isn’t “if” you are going to find skeletons, it’s “when”. Small businesses are complicated, complicated things – and most have some kind of issue that you as a buyer will find less than ideal. Perhaps the largest customer contract is expiring shortly after you take over as owner. Perhaps the business has unpaid taxes. Perhaps the numbers initially provided by the seller don’t really add up. It really could be anything.

 

Once you have come to grips with the fact that you are likely to uncover something potentially ugly – don’t freak out when it happens.

 

Think of it this way – if essentially all small businesses have issues, and these businesses with issues are still running and are appealing enough for you to have made an offer – then perhaps the issue that you’ve found can be dealt with without completely killing the deal.

 

Issues that can affect your bottom line as the new owner can mean a renegotiation of price and a price reduction to accommodate what you’ve found. Issues with things like unpaid taxes can mean adding provisions to the purchase contract. The point is not everything you find should send you screaming into the night. Concessions and negotiation may be able to solve the issues you find.

 

What if what I find is really, really bad?

 

Unfortunately, some skeletons are definite deal killers. You don’t want to take over a sinking ship, so if what you find is irreparable – you should absolutely walk away. The message here is just don’t jump the gun.

 

If you find something that makes you uncomfortable, ask your broker how bad it really is. A good broker has seen it all and will be able to tell you if a potential issue is negotiable or a deal killer. If it’s negotiable, take a deep breath and head back to the table with the seller to see what you can work out.

 

Do you have more questions about what can be done when skeletons come to light during due diligence? Would you like to know how to decide if an issue is a deal killer? Ask us! Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

https://infinitybusinessbrokers.com


Business Sellers: Deciding When To Let Go



Sometimes in the life of a business owner, the all-important decision of when to sell your business is made for you and is totally outside of your control. A sudden family illness, a need to move to another area or state – for these situations it is easy to make the decision to sell because you have no choice.

 

What if you’re never forced to sell? If you don’t want to stay the owner forever, never retire or pursue a different goal, then you will have to make a decision about when the right time to sell might be.

 

Question mark heap on table concept for confusion, question or solution

 

First and foremost, you need to be readyemotionally ready. If the first buyer who makes an offer causes you to panic and pull your business from the market – then you have wasted a colossal amount of time and energy listing the business in the first place. You won’t be able to hand over the keys on closing day if you haven’t prepared yourself to let go.

 

Secondly, the business itself needs to be ready to hit the market. If it isn’t you need to be ready, willing and able to get it where it needs to be. If all of your paperwork is in a big, disorganized box under your desk, you haven’t filed your taxes in three years and half of your equipment is broken – you probably need to take some time to sort out all of the parts of your business a buyer will want to see before you list. Someone who really wants to sell a house is willing to clean out the clutter and give it a fresh coat of paint. If you aren’t willing to do something similar to get your business ready to sell, then perhaps you yourself aren’t really ready.

 

Lastly, you need to look at the market. If you were thinking about selling your business right after the financial crisis that caused the recession, you probably would have decided that it would be smarter to wait until the market came around. Market fluctuations in the small business world can vary as a whole, by specific industries and/or by local area. The best thing you can do to feel out the market for your business is to have a conversation with a business broker. Finding out the general health of the small business market, how your area is faring and what businesses comparable to yours have recently sold for will probably help you immensely in determining if now is the right time to sell.

 

Deciding the right time to sell can be very difficult because the perfect time to sell doesn’t exist. You need to weigh your goals and the market to determine when the best time would likely be. Talk to a good business broker today and then do some personal soul searching to decide if you really are ready.

 

Would you like to know what businesses comparable to yours have recently sold for? Do you have more questions about how to decide the best time to sell? Please feel free to leave any questions or comments here and we would be happy to help.

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

https://infinitybusinessbrokers.com



Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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