Most of us like to think we make logical buying decisions.When you buy a house you weigh up the location, whether it has everything on your tick list and whether it will suit your lifestyle. If you’re torn between two houses you might even make a list of pros and cons.
You’ll be caught up in thinking about the difference this deal will make to your life, and how it will change things for you and your family. It’s yet another reason why the step-by-step process we follow is vital. It means you can be confident the business you’re buying ticks all theright boxes and puts you on the path to achieving what’s important to YOU.
Most of us like to think we make logical buying decisions. When you buy a house you weigh up the location, whether it has everything on your tick list and whether it will suit your lifestyle. If you’re torn between two houses you might even make a list of pros and cons.
But we’re all human, and ultimately you’ll make your decision based on emotion. Sure, you might back up your decision with facts, but ultimately your heart rules your head. It’s why Kirstie and Phil get so exasperated with the couples on Location, Location, Location – because they don’t make logical decisions.
Buying is 80% emotion, 20% logic
It’s exactly the same when you’re buying a business. But more importantly, it’s exactly the same for the vendor who’s selling their business. Clearly they want to achieve a good deal, and they may even have a particular figure in mind, but their decision to sell to YOU rather than someone else is still an emotional one.
When I help my members to buy businesses, one of the key things we focus on is how you get to grips with what’s important to the vendor. How will their life look after the deal is done? How will it change on the day of the deal, and what are their expectations down the line?
It’s vital to build rapport with the vendor and get on their wavelength, so that you can understand what they really want to get out of the deal.
We’re looking to buy owner managed companies, and usually the owner has built the business up from scratch. It’s their baby! So they’re not going to sell it to just anyone.
What’s important to the vendor?
The vendor will be worried about their legacy. They’ve built this business up and they want it to continue to thrive. Often they’ll have known their staff for a long time and want to be sure that they’ll be looked after. And, of course, they want to be sure the deal is going to provide enough cash for them and their family, so they can plan the future they’ve envisaged.
So this is why you need to find out from them exactly what they’ve got in mind. Is speed important, is it price – is there a figure they need, or is what happens afterwards the most important thing?
If you don’t know, how can you structure a deal that ticks all the boxes for them?
We had a deal recently where it turned out that the most important thing to the vendors was that they’d have enough money to spend the summer months out in Florida, as one of them was in poor health. So our next question was, “How much money do you need to do that?”
For them the total figure was less critical than their ability to head out to Florida using the money they got on the day of the deal. The way the deal was structured was key. And we wouldn’t have known that if we hadn’t got to know them, built good rapport, and got to the bottom of what was important to them and why.
Your business buying decisions
When you’re buying a business, you’ll get caught up in your emotions too. You’ll use logical things like business valuations, deal analysis and financial forecasts to decide whether you want to buy a business, but at the end of the day you’ll make an emotional decision.
You’ll be caught up in thinking about the difference this deal will make to your life, and how it will change things for you and your family. It’s yet another reason why the step-by-step process we follow is vital. It means you can be confident the business you’re buying ticks all the right boxes and puts you on the path to achieving what’s important to YOU.
To find out more about how emotion can affect your business, give us a call or join us online:
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As always if you have any comments or questions please email us:
theteam@thebusinessbuyersclub.co.uk