Q: I’m trying to purchase a business, but the seller keeps asking for more. When do I say, “Enough is enough”?
A: Once, my wife and I were trying to purchase a house in Northern California. We made a full-price offer directly with the seller who hemmed and hawed for several weeks. He then asked that we pay him for some additional items over and above the purchase price; we begrudgingly agreed. He made us wait some more. Then he said he would finalize the deal if we included our car! That was the last straw. We walked away from the deal and learned a valuable lesson. When any deal becomes too one-sided and unreasonable, it’s time to walk away. We finally purchased a beautiful B&B with an ocean view; it was the best move we could have made.
When you first approach a potential seller to buy his or her business, you have given over some control already as they know of your intentions and desire for the purchase. There are several ways to combat this situation:
1) Hire an intermediary to act on your behalf. Simply have them contact the potential seller and ask if they may be interested in selling. Instruct them to say that they are calling businesses in the area so it doesn’t look like the owner is being specifically chosen.
2) Don’t mention a price – he who speaks first in price negotiations is usually the loser. You may offer more than what the owner thinks the business is worth.
3) If you feel the asking price is a bit high, you can always agree to a price based on the outcome of your due diligence. Let the process move forward. You can usually find items in the business that could lower the price.
In your quest to purchase a business, if there are unreasonable demands by the seller and lengthy negotiations that always seem to be one-sided and unresolved, then it is time to simply walk away.