A Business Seller Should Not Act Like a Car Salesman!

As a business broker representing business owners selling their businesses, I try to interview every potential business buyer in my office. I then spend the necessary time to listen and learn about buyer’s skills, financial capabilities and personality traits. I try to guess the types of businesses he/she would be successful at. Most buyers come to me for a specific business and are mostly interested in knowing as much as they can about that business. They expect me to sell them that business just as a salesman would do to sell you a car. When they see that I am not trying to sell them the business but trying to help them find the right business for them, they feel more comfortable with me and consider me their confident.

Unfortunately, during the buyer-seller meeting, most sellers act just like a car salesman. They keep boasting that their business is flawless and is the best investment anyone can ever make. This looks obviously very suspicious to potential buyers. Confidence is lost and the probability of having a transaction as a result of such a meeting is almost nil.

I can understand that most successful business owners are involved in selling in most of their time. They are selling their ideas to employees, selling their products and services to customers, selling their potential to investors etc. As a result, they tend to assume that selling their business will be no much different from selling anything else.

Unfortunately, this approach simply doesn’t work with business buyers. Buyers are investing their hard earned lifetime savings in the business and they are as a result very cautious and extremely suspicious. The natural question they ask is “if your business is so good Mr. seller, then why are you selling it?” and, they expect the seller to be hiding some important unfavorable facts that would make the purchase of that business a very bad investment. When the seller keeps insisting that the business is perfect and that he/she is selling for strictly personal reasons, buyers simply don’t trust.

There are two real problems with this traditional selling approach. First, buyers expect the business to have problems. Nothing is perfect in life and yes if the business were perfect, the seller wouldn’t be selling it. So, the seller’s claim that the business is perfect is clearly a lie or at least an exaggeration. Second, most buyers want to buy a good business they can make great. If the business is already perfect, then the buyer has very little chance of improving it, which contradicts the very reason why the buyer is trying to buy it. Furthermore, by hiding the business’ imperfections, which could also be called opportunities for improvement, the broker end-up selecting the wrong buyer for the business. Even if the buyer trusts the seller and does put an offer, he/she will soon discover some of the imperfections during the due diligence period and will feel having being misled and will walk away. In the meantime a real buyer with some capabilities to correct the problems of that business has not been identified and has been lost. This is a lose-lose situation where the seller loses some real buyers and a lot of his/her credibility in the marketplace, the buyer loses a lot of time and money spent on accountants and lawyers and the broker wastes his time, the only asset in his possession.

Business sellers considering achieving results in their sale process should definitively abandon the traditional car salesman approach and become very upfront with  business buyers by telling them the good, the bad and the ugly about the business as early as possible in the sale process.