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Since buying a business may be the largest investment that a business buyer ever makes in their lifetime, confidence in the seller and the company in question is a must. After initial contact has been made with a potential seller, the business buyer will want to visit the business before closing the deal. Familiarizing oneself with the company and its owner is an excellent way to establish trust between buyer and seller. One would not typically put a bid on a home without viewing it first, and the same thought process applies when buying a business.
The most important rule to keep in mind when visiting a target business is to retain a low profile. When the seller sets up a meeting with the business buyer to discuss acquisition plans, this is the perfect opportunity to scope out the inner workings of the company. If, for example, the business in question is a pizza parlor, consider sitting down and having a slice before the meeting. Pay attention to how the employees interact with customers as well as with each other. Employee attitudes can say a lot about a business and the example that is set by management. However, it is vital that the business buyer does not reveal the purpose of the visit to employees.
Avoid speaking with clients or vendors as well. It will look suspicious if someone other than the owner is approaching customers and asking detailed questions. Not only is staying undercover in the best interest of the business buyer, but it protects the seller as well. Should word of a potential sale leak to employees and/or customers, it could ruin the reputation of the business and sabotage the deal. Therefore, speak no word of a business deal in front of anyone other than the owner and the privileged employees that are involved in the process.
The business buyer must include the seller and the broker in their visit. Firstly, if the buyer is accompanied by the seller at all times, then the buyer does not run the risk of being blamed for releasing the information of a sale, should this sort of breach of information occur. If the business buyer has hired a broker to assist in the deal-making, then the broker should be involved in all transactions. While the business broker’s presence is not meant to lead the initial meetings, they can act as backup should details become tricky.
If any red flags appear during this visit to the business, the business buyer should discuss them with the broker in private after the meeting, even if they are simply going on a gut feeling. Since business brokers are well-versed in the work of buying and selling, they can advise the buyer whether or not their concerns are valid. Typically, if a buyer is feeling uneasy, it is for good reason and it may be time to move on to another seller.
If you would like assistance on buying a business, please contact George & Company, located in Worcester, MA. We would be happy to help you find the best business acquisition that most accurately fits your desires and assist in leading you through the acquisition process.