Negotiating to Buy a Business – Why you don’t want to “steal” the business from the Seller

Buyers, no matter what they are buying, never want to pay more than they need to. Some people make a living buying at a discount and selling for a premium. You find a great deal on a car from an old Grandmother who doesn’t know its value. Or you buy a foreclosed home at an awesome price, just because the bank wants it off their books. Same for a business, right?

Not usually. The difference between buying an asset like a car or home is that they are tangible assets. You can check out the engine or have a home inspection, and you pretty much get what you think you are getting.  But buying a business is usually much more than buying assets. Unless you are buying the business for only the value of the assets, then you are also paying for intangible assets like goodwill, operating procedures, a business that is generating cash flow, and most importantly, training and transition from the Seller. Unless you are an industry pro, you really need to have the Seller work with you to assure a smooth transition of those “intangible assets.”  For example, how do they do their employee scheduling to maximize efficiency and minimize labor costs? What is the secret sauce for that Crème Brule recipe?  What days and hours were the busiest in your store last Black Friday?  Which employees are ready to promote, or which employees have shown that they are best left in their current position? Or what alternate vendors are available to source materials used in production?

So, if we can agree that it’s important to have a productive training and transition time with the Seller and that the ongoing support of the Seller could be very helpful in the success of the business after the purchase, why would you want to create ill will with the Seller by “stealing” their business that they have worked so hard to build? How much cooperation do you think you will have if they think they were treated unfairly?

While it’s ok to negotiate, it’s seldom a good idea to take advantage of a seller’s circumstances by offering a low-ball price. Because you might just get what you paid for.

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