Assess business fit before making an offer

Things are beginning to feel promising. After reviewing several businesses for sale, your buyer instincts have set in, and you’re confident gathering information about potential acquisition opportunities. You’ve connected with constructive and trusted advisors. You’re optimistic about the current business under your team’s review.

Buyer and seller alignment

The review process begins with assessing your target’s technical and financial data. Upon initial review, advice from lawyers, accountants and valuation experts should suggest that the business is a solid technical candidate: financial reports reflect positive company growth, the business’ assets are strong and financing plans look promising.

As a buyer’s review of their target business unfolds, the focus of the process will gradually shift. What first centred around sourcing technical information about the business will soon become an effort to recognize the business’ ethical and conceptual character.

Before finalizing the decision to offer, a buyer must further assess the fit between them and the business.

Ask yourself: How do you, the buyer, and the business mutually align?

At this point, the seller is also in a stage of reviewing—they’re simultaneously assessing your fit as a buyer.

Is this acquisition opportunity a mutual fit?

Business buying is unusual in the sense that buyers actually get the chance to form relationships with sellers.

For example, when prospective home buyers view desired properties, it’s uncommon for them to meet or form contact with the properties’ homeowners. In residential deals, buyer and seller contact isn’t necessary. The driving force of a successful offer is typically the dollar bid—the highest paying buyer with the best technical stipulations routinely wins.

This can be the case in business acquisition too, but the average business seller accepts an offer from the overall best-candidate.

Sellers assess buyers’ emotional intelligence to gauge whether or not the buyer is willing to pay their price, adapt to the business’ company culture and respect the company’s long standing values. Likewise, the common buyer will write an offer on the business that best suits their needs: the one that efficiently bolsters a buyer’s financial and professional growth.

During a business acquisition, you court the seller, and the seller courts you.

Yet, buyers have to assume that the seller is also entertaining other buyers. Getting to know the ins and outs of the business ensures that a buyer vets their best match both price-wise, identity-wise and vision-wise. It also positions you above competitors, marking you as credible to the seller (and the seller’s representatives). In gaining your seller’s and their team’s trust and respect, they’ll see you as an enthusiastic, considerate and serious buyer.

Get to know the business seller

Put yourself in the seller’s shoes. Ask the seller questions to get a sense of how the seller characteristically operates, grows and perceives the business. This is your opportunity to review beyond the business’ bio, CIM and marketability—determine the seller’s positive insights about the business and flag any characteristic concerns.

Why is the business owner/seller selling the business?
Planned retirement
No suitable or willing successor
Operational struggles or exhaustion
Change in career path
A seller’s reason for leaving may offer valuable insight into the business’ character. What’s the seller’s legacy? Why could they not find a successor? What kind of struggles wore the owner thin?

Has the seller forecasted the business' creative future? Of course, your growth and direction for the business will be different from the seller’s, but don’t discount their ideas or crafted plans for the business’ growth.

How does the seller perceive company morale? Are employees content? Is the company’s turnover rate high? And if so, why?

What value does the owner think the business brings to its industry and customer community? Is the business respected and desirable among its industry? Does it have a loyal everyday or B2B customer base?

Does the owner/seller want to work as an employee after acquisition? It’s quite common for sellers to continue working with a business after acquisition. At the least, sellers remain involved for a time period to train and transfer new operations. Are the buyer and seller compatible to work together?

Know your intentions as a buyer

Business buying isn’t a one-size-fits-all process; every buyer has their own intentions and reasons for purchasing a pre-existing business. This is why developing and utilizing search criteria is vital, so buyers can compare and contrast their entrepreneurial intentions with the pre-existing business’ operations and its seller’s objectives.

Assessing your intentions

If necessary, are you willing to work as either an equal, employee or employer to the seller?

Do you agree with the seller’s vision for the business’ future?

If applicable, are you able to carry out and honour the seller’s legacy?

Do you align with the company’s culture?

Are you hesitant or concerned about the seller’s intentions?

Village Wellth ardently believes that the building of a good rapport between seller and buyer paves a solid and efficient course to a successful offer.

Putting in the effort to understand a business and its owner not only sharpens your competitive edge but also helps you recognize your intentions and needs as a buyer. Through education and consultation, Village Wellth supplies buyers with the tools and knowledge to find business acquisition opportunities that realistically suit their entrepreneurial goals, values and intentions.

During the acquisition process, aligning trust, character and credibility between a buyer and seller will transform what was once an acquisition opportunity into an advisable, fruitful acquisition deal.