Business Buying Pitfalls: Why aren’t business buyers making more deals?

What I see is that more buyers are becoming motivated to buy than they were earlier.

Earlier there was a fear that the economy might worsen after a purchase was made. That fear has subsided because of the positive news about the stock market and economic indicators both which have indicated the worst has past and we  moved out of the recession. My personal opinion about the direction of the economy does not necessarily agree with the indicators but that is not what we are addressing here.

The Truth will Help you Sell Your Business

The other motivation moving buyers is that they have been looking at businesses that are on first inspection appear to be viable and upon due diligence are not. Buyers are highly motivated to buy because they are eating up their savings while they are looking for a business which they can not find. If sellers would honestly present their business up front, more businesses would be purchased. Buyers want to buy and want to feel comfortable about what sellers provide. They need a level of trust with the sellers or they will not believe anything they are told and will just walk away rather than offer a more realistic price.

Shop for Today’s Market

I do not anticipate an increase in listings coming on the market because the profitable businesses will hold on until the market gets much better and they can get a much better price. The motivated sellers already on the market, are hoping to sell based on 2008 numbers and in some cases 2007 numbers. They tell buyers that things will be better soon and that the buyers should buy now before the market gets better at values based on the better market. Of course, if the sellers are wrong, and the market doesn’t get better, the buyer would have overpaid and would then find themselves in the situation the seller is currently in.

Both buyers and sellers should be very honest with each other, because if they are not, it causes law suits and divorces. A buyer’s mistake can easily cost him $100,000 and his life savings and his marriage. Caution is the watch word today.

Due Diligence Defined: The phrase is composed of two words.  Due, which the dictionary defines as “proper or adequate”, and Diligence, which is defined as “Degree of care or caution expected of a person. Especially as a party to an agreement.” Caution: is the watchword in this definition.

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