Why Do Deals Fall Apart?

It is not uncommon for the buyer and seller to reach an initial agreement on the sale of the business, only to have it fall apart shortly after. The good news is that, as with everything else, there are certain patterns that can be observed and once they are understood by both parties, many deal-breaking problems can be easily avoided. Below are listed the most common factors negatively affecting the sale of a business.

The Seller Fails to Reveal Problems

There are some sellers who are not quite honest about disclosing everything about their businesses. Withholding information about problems doesn’t make them disappear and if they turn up later, usually sometimes after a tentative agreement has been reached, the buyer gets naturally cold feet and is likely to step away from the deal. For this reason, it is imperative for business sellers to be as open about the drawbacks as they are about the positives.

The Buyer Has Second Thoughts About the Price

Another important factor is price. Buyers can sometimes agree on a price, only to discover that the viability of the business may not support that price. This realisation doesn’t necessarily have to be based on hard facts, but can also come from the buyer’s guts. All in all, it is always important to establish a fair market price of the business so that it doesn’t happen that the seller wants more for the business than the buyer feels it is worth.

Both the Buyer and the Seller Grow Impatient

In some cases, the lingering sale process may cause impatience to set it. Usually, the buyer asking for more information gets tired of waiting for too long and the deal is in jeopardy. Both parties must understand that the closing takes time. However, it shouldn’t take too long for this scenario to occur. It goes without saying that using an outside professional – business broker – aware of the time variable can be of a great advantage and can inevitably lead to a successful close.

The Seller Doesn’t Really Want To Sell

Occasionally, buyers will encounter sellers who are not quite sure if they want to sell their business after all. The business can in many instances represent the seller’s life work and selling it has often many emotional ramifications. Therefore, any doubts on the seller’s side have to be dispelled long before even entering the sale process.

Or…the Buyer Doesn’t Really Want To Buy

Similarly to the previous example, there can also be buyers who are only testing the waters and don’t really want to buy. They may only realise this far down the road when their dream of owning a business is met with reality they are not prepared to handle. In either scenario, having to deal with a retreating seller/buyer can be quite frustrating and it is, therefore, necessary to assess the opposing party as good as possible before stepping into any serious negotiations.