I occasionally attend a training/sales meeting that is held with a number of business brokerage and M&A firms in
About three brokers at once said, “which January?” “This January, 2008” he said. The room erupted. All of us wanted to hear the story. What had gone so horribly wrong that someone who bought a business would give up within a few short months? Usually within three months the new buyer is still figuring out the accounting system.
In this case the business was a specialized cleaning service with three employees. The buyers were a husband/wife team, and the husband was going to keep his job and the wife was going to run the new business. Plain and simple, the wife just plain didn’t like the business. Sales slipped, and the employees were let go.
The problem, of course, is that without employees and without the sales volume, where is the business? In other words, the value of the business is far less, and most buyers would be very reluctant to pay much of anything for this business. A sad story, to be sure.
We try to help the seller qualify the buyer, both financially and in the ability to run the company. But sometimes it just doesn’t work.
I’ve personally sold a company in which the seller thought the buyer had a drinking problem. I didn’t witness any drinking, but the buyer and seller went to a trade show together before the deal was closed, and he witnessed some heavy drinking. I completely concurred that this could be a serious problem, but in the end the seller sold the company to this buyer. I’ve talked to the seller a few times since, the last time about 18 months after the transaction. Yes, the buyer drinks and it is a problem. Fortunately the seller works as a consultant for the company and he helps run the company. He is actually pretty happy with the arrangement, since he gets paid to work there part time, and has plenty of time off without having the stress of business ownership. I feel very lucky, since it obviously could have been a whole lot worse for both of them.