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If you are trying to sell your business, you may already realize what a stressful process this can be. You have to assemble all of your records, answer a constant stream of questions, deal with new requests from prospective buyers – all while trying to maintain your business in good working order.
You’ve worked hard at your business – invested time, money and energy. To you, the value is more than money. The business is an extension of your life.
The problem is, to any buyer walking through the door your business is just one of many, and the numbers on the bottom line mean more than anything else.
What happens when these vastly different views of a business collide? In some instances the result is a low-ball offer, where a buyer makes an offer so low a seller won’t even consider it, and oftentimes makes a seller unwilling to even negotiate with that buyer.
The low-ball offer is just a reality of having your business on the market, so if you are trying to sell your business, you’d better be ready to get one – and also be ready to keep your composure if it happens.
Many sellers see a low offer as a personal offense, but you have to remember that the only person who sees your business the way you do – is you.
You really shouldn’t be insulted by low-ball offers. Be happy you got an offer at all. The reality of the business market is your final selling price will be somewhere between your initial listing price and the first offer from a buyer. If you listed your business at the absolute rock-bottom price you are willing to take, that is a mistake, as is demanding that you get a full-asking price or there’s no deal. You need to be realistic and you also need to have thick skin.
Any offer, even a ridiculously low one, can be a starting point for negotiations.
Low-ball offers are typically from two kinds of buyers. The first are tire-kickers who low-ball sellers just to see if they can get a business for a steal. Most of the time this type of buyer never actually buys a business, they just shop around indefinitely. You will know if a low-ball offer is from this kind of buyer if the number is obscenely low, if the reason for the low offer is from way out in left field or if they have no explanation for the low offer at all.
The second type of buyer who makes a very low offer is a buyer who is looking for a deal. They low-balled you on the value of your business because they feel that you need to prove your asking price, but they want to get the deal rolling. For this type of buyer it is important to remember that your listing price is a jumping off point, not a non-negotiable price tag.
No matter what kind of offer comes in, consider it a step in the right direction. You will quickly be able to figure out if a buyer is serious or is just shopping around.
Are you a seller who wants to know how to handle a low-ball offer? Do you have questions about what makes an offer reasonable or how to begin negotiations? Ask us! Please leave us a comment or question here.
Michael Monnot
941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907
I have a offer from someone whom has SBA loan pending do you know if SBS s low ball at the last min because they want to offer $70,000 less.
That is not a tactic of the SBA by any means. There are lots of things that go into the SBA approval process but to focus on your question, what should happen is you will be getting a request from the buyer/buyers broker with all of the necessary information to satisfy due diligence and underwriting for the loan.
Brokers/CPAs should somewhat vet the financials, perhaps your broker did get it pre-qualified through SBA.
But they will be verifying the income. You should know rather early whether the income you have provided is acceptable to underwriting.
If for some reason the income does not match or SBA will not take it (examples like cash, some personal add backs may be difficult to prove…) they have a couple of options. If the income they come up with fits within the buyers ratios. If it does not then they may come back with a couple of options such as either lowering the purchase price to make it fit into SBA or perhaps you would be asked to hold a 2nd note/mortgage in which you may not be able to receive any payments on that portion of the loan for a term typically in the 2-3 year range.
The other option is to turn the loan down if it does not fit within their parameters.
What should likely be the only other issue with the agreed upon price would be if the deal is large enough to require an appraisal (usually $250k+), if for some reason that comes back lower than the purchase price then again the options would be to lower the price, buyer comes up with the difference at closing or the deal falls apart.
There are never any absolutes in lending, but hopefully I have answered your question sufficiently.