In the previous post we discussed two biggest fears your potential buyers have when they are considering purchase of your business. We showed how you can help buyers overcome these fears and make the sale of your small business go through quickly and smoothly.
In addition to the two fears related to business finances, there are other operational FUD (Fear, Uncertainty, Doubt) factors that buyers, particularly those who have not owned small business before, are likely to have. With proper planning you can help alleviate these FUDs and make the selling process go faster. After all, it is in your best interest to shorten the sale process as much as possible. The longer it takes for sale to complete the more chances of something going wrong and the sales falling through.
Based on our experience with both buying and selling business, we have come up with several questions that are likely to surface in buyer’s head when he is going through due diligence. The sections below document those questions along with our advice on how you can deal with them.
- What if the key employees of the business leave right after I buy the business?
The key employees are called ‘key’ because they make the business operate smoothly. They know many written and unwritten rules of your business. That is why it is in the best interest of all parties to ensure that the key employees will stay around and continue to run the business.
As current business owner, you can help by talking to the key employees before hand and comforting them their job will be secure after the business is sold to a new owner. In return you should get assurance from them to stay with the new owner. You can even request the buyer to provide incentives in the form of bonus in exchange for their assurance. This will help reduce anxiety for the buyer. Another technique you can use is to promise the buyer to provide certain hours / days of your service after the transaction is completed to ensure smooth transition. - How will I be able to run this business? I don’t know anything about this?
Many new buyers are particularly afraid of this situation, where they walk in the business after closing papers are signed and don’t know what to do next. While it does appear scary in theory there are ways to ensure that the buyer will feel comfortable on the first day.
Some of the techniques being used are – preparing a written documents that show how various processes are performed in the business, having the buyer go through franchise training, helping new buyer run the business for certain period after transfer and so on. Again, it is in your best interest to help the buyer feel comfortable during transition so that there are less chances of buyer getting cold feet. - What if the equipments I am being sold are lemon and starts breaking down right after I buy the business?
This experience is similar to when you are buying a used car. The buyer doesn’t know the condition of the car. It could break down on the way back home after the check is written.
You can give assurance to buyer regarding condition of the equipments by showing all the maintenance records (you have been doing proper maintenance of the equipments and keeping records, right?) and providing information about your technicians. You can also offer insurance for certain period that will assure the buyer that the major breakdowns will be taken care of without having to incur large expense.
What other buyer questions are likely to hinder the selling process? How would you deal with them?
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