What Are the 10 Top Deal Killers in Business?
I hate to admit this, but I am a deal junky. I love finding deals, putting deals together, and especially closing deals. I do this for a living by helping my clients find businesses they want to buy and sell. But my deal-making desires and skills go beyond just helping my clients. I love finding deals and studying deals for myself, too. In my book, “Hidden Wealth: The Secret to Getting Top Dollar for Your Business,” a ForbesBooks title, I talk about having the disease called “Dealitus,” where it was almost impossible for me to pass up a deal. It got so bad that, at one time, I owned and operated six different businesses until I got a hold of myself and finally either closed or sold them off. Since I am making true confessions about my issue with “Dealitus,” I would also like to share the Top 10 Deal Killers when putting a deal together and keeping it together to closing. 1. Unrealistic sales price. We all think our stuff is worth more than it really is. This is human nature. Since it belongs to us, we take things personally, which in our minds makes them worth more than what they are really worth. The truth of the matter is that the market dictates the value of a business, not the seller. Being unrealistic about what you want your business to be worth and what its real market value is will kill a deal. 2. Hiring an attorney who is not versed in how to treat the sale of a business. They may be a good attorney, but they may not be experienced in the buying and selling of a business; therefore, they flounder and drag the process out, heightening the chances of the sale falling through. 3. Sellers who don’t understand that the selling of a business is a process. Certain things need to be done in a specific order to complete the sale of a business, and if the seller is not willing to cooperate and follow the process, chances are that either they, the buyer, or both parties will get frustrated, and the deal falls apart.
8. Buyers or sellers applying the definition of insanity, which is continuing to do the same thing over and over and expecting different results. When you are in the process of selling your business, you must disclose everything and be honest about your business. If you have been skimming in the past, quit doing it because the buyer needs to know what they are buying, because if you are not honest about something in your business, and the buyer discovers this, they will think you are lying about some other things about your business. 9. The ‘D’ syndrome. I talk a lot about the “D” syndrome in my book, which is called death, disease, divorce, partnership dissolution, disruption in the marketplace, and my favorite one: Dumb. The “D” syndrome happens to all of us because we do not have control over it, and it is considered a significant life-impacting event. Regardless of what it is called, it can kill a deal the day before closing. I have had people have heart attacks, wives running off with the bread man before the closing, and even people dying the day before a closing. Sometimes, the deals went forward and closed, and sometimes they fell apart. The “D” syndrome was the reason. 10. Passage of time. If there is a No. 1 reason for a deal to fall apart, it would have to be the passage of time. The buyer and seller may be motivated to get a deal done, but if things drag out too long and burn up time, the buyer or seller will get frustrated and lose interest, and the deal will fall apart. Of course, there are a multitude of other reasons deals fall apart, but the 10 reasons I have listed here will kill a deal. So, be aware when working on putting your deal together, and if you are not experienced in doing a lot of deals, maybe you should find someone who has done over 900 deals and ask them for some assistance.
4. Sellers not being forthright and disclosing certain liabilities or
outstanding issues. The business, instead, tries to hide things from the buyer, which sets a bad tone with the buyer, possibly killing the deal. (I once had a seller lie about there being no competition near their business, and
when the buyer visited the location, it was obvious there was a competitor a couple of blocks away. It killed the deal.) 5. Business trends. The business experiences a downward trend in sales, either from a loss of sales, construction, or some outside event. When this happens, the business is no longer trending upward, and the sales price will trend downward. The value of the business is what it is today, not last year or next year, but now in the present. 6. Not investing in your business with the capital improvements it needs to continue to be profitable. It goes by the rule of “Pay me now or pay me later.” If you don’t pay for the capital improvements while you are operating the business, the buyer will make you pay for them with a deduction in the sale price when it comes time to close on the sale. 7. The buyer, seller, or outside parties do not understand the urgency of the transaction and are non-responsive. This happens a lot during due diligence with outside parties such as accountants, attorneys, surveyors, municipalities, etc., taking the “we will get to it approach,” and frustration sets in, thereby killing the deal.
–Terry Monroe
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