That’s the myth, isn’t it? Those nasty, selfish caricatures like Mr Burns in The Simpsons, and the dad character in The Lego Movie – they’re the kind of people buying and selling businesses, with no thought for anyone but themselves.
Right?
Wrong. Of course you can’t be a complete wet lettuce who doesn’t have the guts to ask for the price you want, and the conditions you want to put in place on a deal.
But there is absolutely no need to set out to fleece the vendor. You’ll get a much better result if everyone involved in the deal is happy with what they’re getting.
My own viewpoint is that I don’t want to do a deal where the other party involved feels like they’ve been beaten up at the end of it. Often you’ll want the vendor to stay on in the business in one form or another, so it’s in everyone’s interest to create a win-win deal and maintain a positive relationship with your vendor.
Like almost everything in life, the success of a deal comes down to the people involved. Developing a trusted relationship is key. The vendor needs to have confidence in you, and you need to be able to trust the vendor.
Creating a positive outcome for the person selling you the business is a good thing. With several vendors I’ve worked with I’ve helped them to retire, which is a great feeling.
But equally, you want to be sure of a good outcome for you as the buyer. You need to be very careful that you’re aware of the seller’s motivations, and that you’ve done your due diligence. You can learn from my mistakes in this area. I did a deal where I paid the vendor £350,000 on the day the deal went through. Unfortunately that was enough cash for him to finish building his property abroad, and that was all he was interested in.
The business started to nosedive after the deal, and it turned out I’d made a big mistake in not checking the longevity of one of the key contracts in the business. That was a painful lesson, but I’m a fast learner and it’s not a mistake I’ll make again. Plus I get a kick out of the fact that by learning from my early errors, I get to help my members avoid making the same mistakes.
Every deal is different, but you need the same tools and techniques regardless, and you definitely don’t need to be a “Bond villain” style business buyer. Having strong ethics means you can sleep at night, but from a practical point of view – it’s much more likely to create a positive outcome for both you and the vendor.
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