If you came of age in the 1970’s, you likely learned the phrase caveat emptor – Latin for “buyer beware” – from one curly-topped architect named Mike Brady.  You remember that “Brady Bunch” episode, right?  Mr. Brady, never one to miss a thigh-high fastball teachable moment, cautions eldest son Greg to not hastily buy a hot rod.  But how familiar are you with the expression caveat venditor?  Well, it means “seller beware” and if you own a small business and/or advise others who do, take heed when preparing said business(es) for sale. 

The American dream, at least the one outside of owning a house with a picket fence and a yard full of Big Wheels, is to build a business that can be sold.  The intrepid owner works diligently for decades, producing an income for him/herself as well as staff members, basks in the glow of a job well done… and one day wants to pull off the ultimate feat by selling the business for a tidy sum.  What our hard-working owner friend may not realize is that those who proactively make bids on the business may be less-than-scrupulous in tendering their offers.  Some may prey on the owner in an attempt to time a takeover offer when hard times hit.  Others present themselves as the dream “strategic” acquirer only to low-ball the unsuspecting would-be seller.  Still others will make a seemingly high offer with every intention of whittling it down as the due diligence process unfolds over 30 days.  It ain’t right but it happens all the time.

So what’s an honest owner to do?  Breathe.  Think.  Prepare.  When approached by a would-be buyer, often it’s best to first say the business isn’t for sale.  If you anxiously accept someone’s invitation to chat about selling, aren’t you potentially giving up whatever precious leverage you may have?  If you tell the inquirer that you’re not interested in selling, at a minimum you’ve bought yourself some time... and demonstrated that you own a business that’s perhaps worth hanging on to!  (And it’s not like they’re going to vaporize should you change your mind the following day or week.)  Consider: Are you truly ready to walk away?  What would you do if they made an attractive offer?  How would you know whether or not you were leaving money on the table?  Competition may be the bane of your existence in running the business day to day, but competitive offers for your business could very well be your new best friend.

So it’s good to temper your enthusiasm for selling with a pinch of suspicion and a cup of caution.  Be wary of others’ motives.  If someone tosses out a ballpark figure to buy your business, it’s unlikely that they’re making their “best and final” offer.  Deals take weeks, even months, to stitch together, so it’s okay to tap the brakes and make sure you’ll be truly happy with the outcome.  Life’s complicated and we must be careful. Turns out Mike Brady knew what he was talking about. 

Chris Bond, a business broker based in Franklin, MA, works exclusively with companies that gross under $5M in annual revenues.  He believes that small business owners deserve objective advice on the value of their businesses and a dignified, highly-confidential exit at the proper time to sell. 

Originally posted by Chris Bond on October 7, 2013 at 5:24pm