I've recently looked at a business here in Dallas that I like but I don't have the financials yet. The seller's agent won't release any more details to me until I sign a letter of intent or offer. Is this normal? How can I possibly offer to buy the business if I don't know how much it's making?
I've seen brokers try this tactic and it drives me nuts! Keep in mind that in today's markets good businesses sell fast and so you may at times feel a bit handcuffed when the right business comes along but you simply do not have enough information to move to an offer.
However, there are three ways to overcome this:
The first is to try and set the ground rules - meet with the broker and the seller. Let them know you're very interested in the business but there's just no way you can make an offer until you see the financials. Advise them that making an offer without this information will only result in having to revise the offer (most likely) so rather than drag things on why not let you see the numbers and if you want to proceed you'll put forth an offer immediately.
The second approach is more aggressive and one that should only be considered if there's absolutely no "give" by the broker and you do not feel ready to move forward with an offer as yet. Tell the broker candidly: "unless you're planning on buying this business for me with your money, don't dictate to me how we're going to work. Do not spend my money! Until it's your personal money on the line, I'll be the one who determines how and when I'm going to make an offer". You may find this a bit too bold but trust me; it works...plus you can always revert to the other strategy if you don't make progress.
The third option is to simply make an offer stipulating that the financials you require must be produced within 3-5 days. You'll then be able to review them properly, plus a well written buyer friendly contract will allow you a reasonable period for inspection and the ability to withdraw your offer for any reason whatsoever, up to the last day of the due diligence/inspection period.
|Get more expert advice in Richard Parker's How To Buy A Good Business At A Great Price - the most widely
used reference resource and strategy guide for buying a business.
|Richard Parker is the author of: How To Buy A Good Business At A Great Price, the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center.|