What Motivates a Business Seller?
When working with buyers as a business broker and a CPA doing due diligence, the buyers universally ask one question. “Why is the seller getting out?
This is a good question but the question I ask is, “How do you know if the seller is telling you the truth?”
It is my belief that the seller really does not know his own motivation. He thinks he knows the reason, but he would never tell the buyer even that answer. It is too embarrassing, to the seller, to expose that deep of a secret.
I had a seller who said he wanted a new career, which is partially true. The truth was that he hates working with his employees and their ethnic background. Another said, “I want to retire, I have medical problems.” The truth is that his business is losing money so of course he wants to retire. If I am working for nothing, I would develop medical problems also, because losing money is very upsetting.
You might ask the next question, “But how can one successfully determine the seller’s true motivation for selling?” Unless the seller is totally honest (rare) he will have concocted a feasible story, etc. to prevent potential buyers from seeing any shortcomings or disadvantages in buying his business. Formal disclosures can only go so far. He wants out, and will do or say whatever he must to get out. It is a tricky situation, almost calling for forensics and detective work.
Side Comment-That is why I became a Certified Fraud Examiner. I wanted to learn how to be a fraud detective and find out how come there is $300 billion in fraud committed in the USA per year. What I have learned is how much fraud; the fraudsters actually get away with.
Serious Comment– We must dig and dig below what is on the surface to find the truth of the sellers motivation. The answer is there to be found, maybe below the subconscious mind. With time and trust you will eventually find the answer. It can take from 15 minutes to three hours, off and on to find the answer. I work on this question while I do my other investigative work and keep coming back to the question.
It is a very tricky situation but it is very important to know “why” the seller wants out. Otherwise if the reason is not a valid one, the seller should be keeping his business.
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