Debunking Myths in the Business Buying and Selling Process

By leveraging professional advice, maintaining transparency, and being patient and thorough, you can enhance your chances
of a successful transaction.

With 30 years of experience and having overseen thousands of business transactions, I’ve encountered numerous myths about the business buying and selling process. Here are some of the most common misconceptions and the realities behind them.

Absentee Businesses Absentee businesses are extremely rare. While possible, it requires a robust management team you can trust implicitly. The risk of financial loss is high if attempted on a business that was owner operated in the past.

No Money Down Most sellers expect a down payment, and financial institutions typically require it to secure a loan. Creative financing strategies, such as seller financing or earn-outs, can reduce the upfront cost, but some initial investment is almost always necessary.

The Gifted Business The notion that a retiring owner will simply give you their business is a myth. While some owners might offer favorable terms to a trusted successor, they still expect compensation for the value they’ve built.

Playing Hardball Gets the Best Deals Aggressive tactics often alienate sellers or buyers, leading to a breakdown in negotiations. A collaborative approach, where both parties feel they are getting a fair deal, results in better outcomes.

DIY Legal and Financial Transacting without an attorney or CPA is dangerous. Professionals help ensure that the transaction is legally sound and financially viable. They can identify potential pitfalls and protect your interests.

Unrealistic Price Expectations Expecting to sell or buy your small business for an unrealistic price always leads to a dead end. Valuation ranges are well published and anything outside the norm is often easily identified.

Direct Transactions Save Money Buying directly might save on broker fees, but it also comes with risks. Brokers add value by providing market insights, negotiation expertise, and due diligence support. Without their guidance, you might miss critical details or overpay.

Confidentiality is Not Important Informing employees, vendors, and landlords about your plans to sell or buy a business can have significant, negative implications. It can create uncertainty and anxiety, potentially leading to staff turnover, strained vendor relationships, and landlord concerns. Wait until the deal is finalized.

Every Business Can Have Recurring Revenues Turning a business into a recurring revenue model is challenging, and forcing a change can alienate customers and disrupt operations. A thorough analysis is needed to determine if this model suits your business.

Finding the Perfect Business It’s unlikely you’ll find a business that meets all your (or your advisor’s) criteria. Be prepared to encounter some issues with any business you buy; no business is perfect.

Replacing a Partner Finding or replacing a partner to buy shares of your business is virtually impossible. There is hope that this may change in the future with the passage of 2023’s Brokerage Simplification Act.

Finding a Deal is Easy Simply announcing your intention to buy a business won’t necessarily attract opportunities. Building relationships, constant searching, and demonstrating your seriousness is essential to success.

Sourcing Funds from Others Getting promised money from family, friends, or private equity is often met with an eventual decline by well-intentioned parties.

Valuation Accuracy Valuation is an art. A comprehensive approach, including multiple opinions and market analysis, provides a more accurate picture. But remember that every business and situation is different.

In summary, navigating the business buying and selling process requires dispelling common myths and embracing a realistic, informed approach. By leveraging professional advice, maintaining transparency, and being patient and thorough, you can enhance your chances of a successful transaction.