"insider secrets to selling your business!"
Table of Contents1. Introduction2. Buyer Motivations and Market Outlook3. Seller Motivations To Sell4. Learn How To PriceYourBusiness5. Evaluating Your Financial Statements6. How Do You Find Qualified Buyers For Your Business7. Learn To Qualify Your Buyers Quickly8. Sell Your Business To Qualified Buyers9. Learn How To Close The Sale10. Handling Buyer's Remorse11. Lawyers And Accountants 1. Introduction
The need for business ownership is stronger than ever. Because family responsibilities play such an important part in the lives of men and women, millions of individuals and couples are seeking ways to purchase a business. Tens of thousands of people all across America want to know how they can purchase a business and earn enough money to run a household. That is the reason this handbook is of special need.
In the past decade, business opportunities that match a person's skills, interests, abilities, and ingenuity have become almost limitless. The purpose of this handbook is to show you how to search for qualified buyers and learn how to close the sale.
This handbook offers you many ideas that have been tested and are proven to work to help you sell your business. Business owners have successfully used these ideas and techniques.
There are so many great ideas in this handbook that they can’t be organized into entirely distinct sections. You will find several tips and techniques throughout each section that will relate to a variety of topics; this indicates the connections between the suggestions in each section of the handbook. 2. Buyer Motivations and Market Outlook
The list of market drivers that favor Business Sales activity includes the following:
• Favorable economic conditions. The United States is enjoying its longest period of expansion. Inflation is relatively low, GDP growth is high, and productivity continues to increase (driven by technological innovations and its effect upon the supply chain).• Favorable capital markets. Money for making deals is readily available. Strong equity valuations and appreciation make stock a viable acquisition currency that conserves cash and the debt capacity of acquiring firms. Debt rates have been reasonably stable and continue to be affordable.• Technological impact on risk and capital costs. Technological development has increased the availability of rich, real-time information about customers, corporate performance, and markets, allowing management to more effectively deploy resources and manage uncertainty. The reduction of uncertainty and mitigation of risk combine to effectively reduce the risk premiums associated with business activity.• Growth needed to maintain stock valuations. In the “old economy” stock price increases were fueled by revenue and earnings increases. However, in the “new economy” stock prices seem to move with announcements of partnerships, alliances and acquisitions. This encourages deal activity – especially in situations where organic growth appears inadequate.• Need for skilled and talented people. In a growing economy that is moving at “internet speed,” human capital is a valuable asset that is critical for success. The right acquisition provides immediate access to needed human resources.• Customer is becoming king. In the “new economy”, the customer is becoming increasingly more powerful. Identifying and meeting the needs of customers is critical to revenue growth and staving off competition. Acquisitions provide a viable way for companies to stay responsive to the needs and increasing expectations of their customers.• Synergies between the Old and the New. Acquisitions of technology companies are an attractive strategy for traditional “bricks and mortar” companies seeking immediate access to technology. In addition, the equity markets may reward “old economy” companies that appear to be successfully transitioning into “new economy” companies. On the other hand, cash-rich technology companies seeking revenues, earnings and tangible asset values, may find a merger or acquisition of an “old economy” company an attractive alternative – especially if equity markets and funding sources return to investment fundamentals.• Strategic alliances proliferate in the new economy. The so-called “new economy” encourages strategic alliances and partnerships. In addition to stimulating “buzz” within the equity markets, these alliances provide the players with much needed resources: capital, technology, content and market access, numbers• Today’s private equity firms will be tomorrow’s sellers. Private equity groups have been active acquirers and investors. The holding period for these investors is three to five years. That being the case, as their holdings season and increase in value, the private equity groups may be looking to the M&A market to cash in on their holdings over the next few years.Back to Top 3. Seller Motivations To Sell A survey conducted by a large consulting company provides insight into a seller’s motivation to sell their company. Owners of 300 privately held businesses that were sold or transferred were surveyed. It was found that maximizing financial return as their top succession objective. Next, was minimizing their tax liability followed by protecting the viability of the company, and then finally protecting employee jobs. The survey indicated that the “most widely cited ‘value driver’ for selling the business was the expected synergies from a sale or merger.” Accordingly, 45% of the owners had a continuing role within the company for an average of 4.4 years after the transaction. 4. Learn How To PriceYourBusiness How do you calculate the worth of a small business? Forget about discounted cash flow or a multiple of earnings or assets. Forget all the yardsticks common to valuing larger corporations.
Use an easier formula. A business is simply worth the total of inventory (valued at seller’s cost), equipment and fixtures (at fair market value), leasehold improvements (at fair market value), and one year’s net income.
Additionally, non-cash flow items (depreciation and amortization) should be added back to net income because they represent an accrued expense for income tax purposes and does not affect cash flow. For example, interest expense should be added back to net income to compute an adjusted cash flow. It's assumed that the buyer of the business will not assume current debt. In most cases, the Buyer is purchasing the business free of encumbrances resulting in a new interest expense.Officer's salary should also be added back to net income to determine cash flow. (This refers to the corporation, as the proprietorship does not expense Owner’s Draw).
Officer's life insurance and automobile expenses should also be added back to properly reflect cash flow of the businessFringe Benefits should also be added back to net income to determine true cash flow. Is the owner writing off expenses that are not essential to the day-to-day operation of the business? Are there personal expenses that are not necessary? Does the owner purchase equipment for home use and expense it through the business? Does the owner contribute to an officer’s pension or insurance fund?
• The above items are needed in determining true cash flow of the business. In most cases the Seller will respond favorably to these questions.
Keep in mind this formula is used for Asset Sales. Please contact a support representative at 614-790-1140 to discuss Stock Sales.Sometimes it is not uncommon to add additional value to businesses that are established five plus years. Up to 15% could be added to the selling price of the business.
You can use almost any other business valuation method, but you’ll find you get roughly the same outcome.In fact, numerous on-the-spot business appraisals have been done for the courts when there has been partnership dissolution, an argument, and a death in the family where business ownership is a portion of the deceased’s estate. There are many other reasons for such appraisals when a determination of business worth is required. This formula is being used with increasing frequency because it works.
Understand The Importance Of Down Payment When You Purchase A Business.......Typically a Buyer is willing to put a down payment in an amount equal to one year’s net before tax or debt service. If the down payment is less than one year’s net income (composed of Seller’s draw, depreciation, amortization, fringe benefits, company net, etc.), minus the applicable debt service payment, you will have a business that would be considered attractive to purchase.Down payment is an important concept to understand. Many owners of businesses seem to think they will get an all cash offer at closing.
The majority of times this is an unrealistic request. The Buyer, by leveraging their initial investment, will usually be able to buy a larger company and immediately see an increase in yearly personal cash flow.For example, I've met a Seller who owns a light manufacturing company. They insisted that they would only sell their business if they would be able to obtain an all cash transaction at close of sale. The business is valued at $300,000. Therefore, based upon the Sellers request. The Buyer of the business will need to come up with $300,000 at close of sale.
Rule of Thumb: The Buyer should be able to put down $100,000 at close of sale and finance the balance over five years at 10% (terms could be negotiated to be mutually favorable for both Buyer and Seller).If the Buyer would be required to put down $300,000 at close of sale, then the Buyer would be in a position to purchase a $900,000 business by investing the same $300,000 at close of sale.
Also, the Buyer needs to understand the tax implications the Seller will incur by receiving a 100% cash offer. Once, the Seller understands their personal tax implications they probably will have a strong interest in building a stronger relationship with the Buyer and be in a positive frame of mind to accept owner's financing at close of sale.
5. Evaluating Your Financial Statements
The procurement and reliability of your financial statements is the single most important factor that affects the ultimate sale of your business. From time to time, Buyers have a sense that Sellers will attempt to inflate the profitability of their businesses, and only in rare cases will the Buyer not want to examine the Seller’s books and records. This section will provide an introduction to the analysis of financial statements. The financial statement is defined as a report that accurately discloses the financial results of the business at the end of a fiscal period, usually a year. This statement includes the income statement, balance sheet, statement of retained earnings, and a statement of changes in financial position. It is recommended that the financial statement includes these statements, but it is sometimes impossible to obtain all the required reports, especially the statement of changes in financial position. Therefore, it is recommended that the income statement and balance sheet be acceptable for analysis purposes. 1. Income Statement. The amount of net income earned during a fiscal period, usually a year.2. Balance Sheet. This statement of assets, liabilities, and capital discloses the financial condition of the firm on a specific date.3. Statement of Retained Earnings. This statement contains the accounting period covered and shows the beginning balance in retained earnings, income earned for the period, dividends distributed, and the ending balance. This statement gives the reader full disclosure about the affect of earnings, losses, and dividends on the stockholder’s equity. 4. Statement of Changes in Financial Position. This statement is required by the Accounting Principles Board and is to be prepared in addition to the other statements to fully disclose the financing and investing activities as well as the changes in financial position if users are to make informed decisions about the business. This statement must show the inflow (source) of all financial resources, the outflow (application) of funds, and the net increase (or decrease) in the funds during the fiscal period. 5. Income Statement. The main purpose for analyzing this statement is to determine revenues earned, the costs incurred in earning these revenues, the operating expenses, and the resulting net income earned for the period. The main objective is to determine the earning stream or cash flow of the business. Keep in mind that we are not concerned with overall performance standards, but the extent of the earnings stream prior to debt service and tax write-offs. This is being done to establish the Buyer’s cash flow. • Revenues. These are analyzed and recorded from the sales (top position) of the statement. A distinction must be made to determine the accounting method being used (cash or accrual).• Cost of Goods Sold. This section determines the cost of goods manufactured or sold, and relates to beginning and ending inventories. It should be mentioned that inventory methods can either overstate or understate the cost of goods sold disclosed on the statement, and therefore, inventory costing methods should be disclosed and final ending inventory based on physical counts and methods agreed upon.• Gross Profit. This is determined by subtracting cost of goods sold from revenues and should be compared to industry averages.• Operating Expenses. These expenses include fixed overhead and total operating expense of the business.o Officer’s salaries should be added to net income to determine cash flow. (This refers to the corporation, as the proprietorship does not expense Owner’s Draw).o Depreciation and Amortization should be added to net income because it represents an accrued expense for income tax purposes and does not affect cash flow.o Interest expense should be added to net income if current debt will not be assumed. In most cases the Buyer is purchasing the business free of encumbrances resulting in a new interest expense.o Automobile expense is added to net income.o Officer’s life insurance is added to net income.o Fringe benefits are added to net income. Is the owner writing off expenses that are not essential to the daily operation of the business? Are there personal expenses that are not necessary? Does the owner purchase equipment for home use and expense it through the business? Does the owner contribute to an officer’s pension or insurance fund?• The above items are needed in determining true cash flow of the business. In most cases the Seller will respond favorably to these questions.6. Balance Sheet The balance sheet is an integral part of the financial statement, which shows the financial condition of the business as of a specific date. This report indicates the assets, liabilities, and owner’s capital, usually at year-end. Specifically, it indicates how the profits shown on the income statement have been invested into the business. The following equation can be used to illustrate the nature and use of the balance sheet:ASSETS = LIABILITIES + OWNERS’ EQUITY Assets are the economic resources owned by a business that are expected to assist in the earning of revenues in the future. Liabilities are financial obligations to outside creditors. Owners’ equity is the claim the owners have on the assets of the business. The assets of a business are generally subdivided into the following categories:o Current Assetso Investmentso Property, Plant, and Equipmento Intangible Assetso Other Assets The Balance Sheet can be analyzed to determine a firm’s liquidity (short-term debt paying ability), profitability, leverage (the extent the firm is financed by outside creditors), and equity. It is recommended that the tests for liquidity and profitability be performed prior to recommendations or advice on valuation. Current assets can be compared to current liabilities to determine the short-term debt paying ability of the business. If this ratio is less than 2 to 1 then it is recommended that the composition of current assets and current liabilities be analyzed further because the firm is in a very non-liquid position. In addition, the inventories should be subtracted from current assets and compared to current liabilities for another test for liquidity. (A favorable rating would be 1:1.) Liabilities are shown as current liabilities and long-term liabilities. The owners’ equity section of the balance sheet differs depending on whether the business is organized as a proprietorship, partnership, or a corporation. Liabilities are separated into current (due within 12 months) and long-term (due longer than 12 months). 1. Accounts payable includes current obligations of the firm for operation expenses and the purchase of merchandise.2. Sales taxes & payroll taxes payable are current tax obligations that must be paid during the current year. The business is responsible for these obligations even during a change in ownership.3. Notes or contract payable are debts (secured or non-secured) owed to banks, financing institutions, or individuals. The amount on the balance sheet is the principal balance as of the balance sheet date. Owners’ Equity or Net Worth is defined as the assets less total liabilities. This section will be called “Stockholder’s Equity” in a corporation and “Capital” or “Owners’ Equity” in a proprietorship or partnership. In the corporation, the stock issued and outstanding will be shown in addition to current earnings and retained earnings. SUMMARY: The recommended analysis has included some basic methods for determining the financial health of the business and to assist in the sale process. In addition, it also provides valuable information required in the negotiations between Buyer and Seller. It is recommended that financial statements be obtained or compiled from the Seller’s records to establish the “true” earning stream of the business. 6. How Do You Find Qualified Buyers For Your Business There are many ways to find qualified buyers who will make bona fide offers on your business while maintaining your confidentiality. As a business owner and a company salesman of your products and services you will need to keep the same type of thinking when you're interested in selling your company. Marketing your business for sale is no different than marketing your existing products and services, except you will target a different buying audience and sell your company business plan and successes. If you do not have a formal company business plan you may want to develop a professional marketing portfolio of your company. This marketing portfolio includes: 1. an introduction, including a company overview2. a brief company history3. key management profiles, including salaries and benefits4. your client profiles, including previous and prospective revenue/gross profit analysis5. copy of client contracts; highlight key contractual points 6. company insurance analysis7. equipment list, including serial numbers and fair market values8. copy of lease9. copies of tax returns and financial statements (five years preferred)10. analytical review of financial statements and key financial statistics, including graphs11. cash flow analysis12. digital and social content marketing 13. other important company information relating to the sale of the company Please contact a marketing representative at 740-602-0524 or with additional questions and/or to request a sample marketing plan for your review. When searching for a qualified buyer of your business you will, in most cases, keep your search confidential. Begin with contacting your professional advisors. Many times your CPA, attorney, financial planner, or personal banker may have a client or friend seeking a business to purchase. Sometimes attorneys and accountants will not make recommendations at all. Refer to Lawyers And Accountants below. These professional advisors have always been an outstanding source for referrals. In fact, your professional advisor(s) usually have an excellent understanding of your company and do an outstanding job selling your character to prospective business buyers. Second, depending on your salesmanship or personal time commitments you may want to be represented by an experienced business broker to assist you in searching for qualified business buyers and closing the sale of your business. A well-networked and experienced business broker or intermediate will answer your questions throughout the sales cycle and make you feel comfortable with the sales process. Additionally, the steps leading up to the sale of your business will be kept confidential by a majority of business brokers. Most business brokers will use a confidentiality agreement prior to providing important company information. Also, the negotiation process helps when you have an intermediary pulling both parties together. For example, John Doe, business owner, is presented with an offer to sell his business to Bill Smith, business buyer. The intermediary presents the contract to John Doe. John Doe was initially looking to sell his business for $675,000. Bill Smith made a formal written offer for $425,000. John was extremely upset with the offer. The intermediary explained to John that he had three options:1. accept the offer2. reject the offer3. or, make a counter-offer. The intermediary was able to have John make a counter-offer of $650,000 in writing. Bill accepted John's counter-offer and the transaction was completed. This is the key reason you would need the help of an intermediary. Even if you find a qualified business buyer interested in making you a bone fide offer you may want to invest in an experienced professional advisor who has experience with handling contract negotiations. You may find that outstanding negotiators will pay for themselves. Business brokers typically charge 10% of the sales price at closing. Please refer to Learn How To Close The Sale to learn more about closing the sale on your own. A third way to find qualified buyers is to advertise your business for sale. Advertisements should be brief and bring out the best and most saleable points of your business. It is advised that you keep your name confidential; however, it is appropriate to indicate the category of business being offered for sale. Ads should show the price of the business along with the dollar amount required for the down payment. The net should also be mentioned. If the net is not really that solid, you may choose to advertise other features of the business. It’s important to write down all your features of the business as well as the benefits. If there are numerous assets, or if the asking price is less than the total assets included in the sale, say “Below asset value” or, for example, “$80,000 worth of assets for $60,000 total price”. Remember your ad should be catchy and draw the attention of the reader. You want to include just enough information to draw the readers’ attention and curiosity. Where to place Ads: Internet Advertising. This is becoming an economical and effective choice to market your company. The internet offers coverage 24 hours a day and seven days a week. Also, you can advertise more details about your company. • Please contact a marketing representative at 740-602-0524 or if you have questions and/or if you would like to advertise your business in PriceYourBusiness.Com. Local Newspapers. The major local newspaper is historically the very best choice. Typically, most newspapers have a “Business Opportunities” classification. I strongly recommend the Sunday newspaper. Telephone responses and qualified buyers are without question best from this edition. The Monday and Wednesday editions are a good secondary choice to attract calls. National Publications. Advertising in the publications (i.e. The Wall Street Journal) is expensive but sometimes worthwhile, especially when dealing with a business whose sales price is a substantial six-figure sum or more. Trade Magazines/Other Local Publications. Use these only as secondary sources. Historically, response to these ads has been minimal. 7. Learn To Qualify Your Buyers Quickly One of the most serious mistakes you can make is trying to sell your business to a Buyer who is not qualified to purchase your business financially, or within a suitable time frame. When you completely qualify a Buyer, you may then determine if he or she is really a Buyer, what type of business a Buyer wants, follow-up with the Buyer properly, and control the sale. 1. Determine the buyer’s precise liquid cash position. Don’t be mislead by a claim of borrowing power or potential financial assistance from family or others. Their cash on hand is the only important factor!2. He/She may be interested in purchasing a business that might relate to a happy time in his life such as working as a mechanic when he was in high school or college.3. Explain to the Buyer that there is no such thing as a perfect business.4. Fully explain the concept of Buyer’s remorse.The following is the information you MUST obtain from your prospective Buyer.• How long has your Buyer been looking for a business?• Buyer’s work history (husband and wife).• Cash available to invest in a business.• Does the Buyer have to arrange for a loan for use as a down payment?• Type of business Buyer has been investigating.• Is location important?• Will the Buyer take an active roll in the business?• Hobbies of the Buyer (husband and wife).• Why does the Buyer want to buy a business?• Financial statement (Eliminates surprises down the road).• Income required from business. Miscellaneous – A Few Additional Items to Expect and Control: The Spouse – The spouse must be involved from the outset. Without her blessing, there will be no sale. Anticipate and control this. When you are with the man and his wife, focus your attention and conversation on her. Recognize that the wife is the one who will generally make the ultimate decision. Do not pressure your prospective Buyer. Suggestions are more effective. Listen, Listen, Listen. The problem with most people is they like to talk to the extent that they do not listen to what the Buyer says. A sale should fulfill a “need” or “desire”. What is the Buyer’s “need/or “desire”?
8. Sell Your Business To Qualified Buyers Remember, a Buyer always buys the salesman first, and the product second. Establish complete honesty as your priority. Never make the mistake of bending the truth. You may win initial points with the Buyer by raising their hopes, but in the end, when all the facts are known (and this will always be the case), you will have destroyed your rapport with the Buyer and decreased the possibility of closing your sale. Follow these steps after you have qualified your Buyer, and, after your prospective Buyer has an interest in your business. Arrange for a physical tour of your business premises (a confidentiality agreement should be signed prior to releasing additional company details and/or company tour). Please contact a marketing representative at 614-799-1140 or with additional questions and/or to request a sample confidentiality agreement for your review. I strongly encourage that your spouse attends the meeting with your prospective Buyer. Remember, 99% of the time it is the spouse who will make the ultimate decision. Control the initial portion of the meeting. Encourage a dialogue between yourself and the Buyer. It’s important that you get comfortable with the Buyer. When the meeting comes to a closure it’s important for you to ask the Buyer what he really thinks. Listen and take notes. If the Buyer displays a negative reaction, find out why. If their feelings are strong, don’t try to talk your Buyer back into it. If your Buyer keeps coming back to your business or continues a dialogue, you will know your Buyer is truly interested and wants you to play the role of talking them back into it. Don’t succumb to this. Make your Buyer talk you back into discussing your business. If you’re Buyer has a favorable attitude towards buying your business, find out why and close. Suggest other opportunities. Get your Buyer to fight to continue the conversation on your business. Find out exactly what needs to be done to complete the sale. Then establish an orderly program to overcome the Buyer’s objections. Learn to “Line up all the ducks in a row and then knock them down.” ReversingReversing is defined as a method of accomplishing a desired result, wherein the user “takes away” the sought after result he wishes to achieve. The motive: to make the person fight to “get it back”. Reversing can be an extremely powerful tool for you to use under appropriate circumstances, if used properly. Example situation: Your Buyer, Bill Jones, has executed your purchase contract and receipt Thursday morning. By Thursday afternoon, you have accepted and you have placed the sale into escrow. At 8:00 pm that night, the Buyer calls you at home and explodes with Buyer’s remorse. He tells you he is uncomfortable and panicky about the sale. What do you do? The worst approach: While on the phone you say, “Well, Bill, tell me precisely what is bothering you. I’m sure we can work it out.” This approach will probably do you no good whatsoever. First, you will never accomplish anything on the phone. Only one-on-one contact will work. Second, listening to his/her complaints and trying to correct them will probably not work. The reason – emotions are now heavily in play. Common sense explanations will serve only to worry the Buyer more. He will become extremely defensive and withdrawn. A much better approach: “Bill, you are obviously upset. I doubt that we’ll be able to accomplish much on the phone now. I’ll be in my office at 9:00 am sharp in the morning. Why not meet me and we’ll discuss this at length.” (Take pressure off.). When Bill arrives at your office, tell him, “Bill, I’ve been thinking this over. You are obviously uncomfortable about the sale and I certainly wouldn’t want you to proceed. So let’s just forget about it. You may want to evaluate some other companies on the market. Your immediate goals: Take the pressure off! Your more immediate goals: to make the buyer fight to re-open the conversation on the contracted sale. He may say “But I signed a contract. How can we just forget about the sale?” Your reaction, “Don’t worry”. REMEMBER: The longer you “take it away”, the better your result should be in “reversing” the Buyer back into the sale. Your best chance at accomplishing this is by removing the pressure. The tactic of, “You’ve signed a contract, you’re stuck, it’s too late," will only make the Buyer defensive and drive him to an attorney. Reversing really takes courage but it works much more often than not. Continue the process. Anticipate what might be causing the Buyer's concern. Deal immediately with those concerns, even if they are only potential concerns. If you do not, they will grow into concerns that will block an ultimate sale.Continue to anticipate. For example, if the Buyer has not purchased a business before, he may be unfamiliar with the paperwork to come. Give him a copy of an old contract. Let him take it home so that when the time comes for him to sign the purchase contract, he will not be afraid of its appearance or content. Control the initial portion of the meeting. Encourage a dialogue between yourself and the Buyer. It’s important that you get comfortable with the Buyer. When the meeting comes to a closure it’s important for you to ask the Buyer what he really thinks. Listen and take notes. If the Buyer displays a negative reaction, find out why. If their feelings are still strong, don’t try to talk your Buyer back into it. If your Buyer keeps coming back to your business or continues a dialogue, you will know your Buyer is truly is interested and wants you to play the role of talking them back into it. Don’t succumb to this. Make your Buyer talk you back into discussing it. If you’re Buyer has a favorable attitude towards buying your business, find out why and close. Suggest other opportunities. Get your Buyer to fight to continue the conversation on yours. Find out exactly what needs to be done to complete the sale. Ask yourself, “’What is stopping the buyer?” Then establish an orderly program to overcome the Buyer’s objections. Learn to “Line up all the ducks in a row and then knock them down.” 9. Learn How To Close The Sale If the Buyer contacts you and is very interested in making you an offer either by a letter of intent and/or a formal purchase contract. Please follow the following steps: • Calm down and take a deep breath.• Make certain there are no contingencies in the sale. The buyer can cause a lot of emotional pain by requiring you to go through hoops and no sale will come out of it. If contingencies cannot be avoided please strongly advise that these contingencies must be taken off within ten days.• Request an earnest money check, which should be made to the escrow agent. I would ask for minimum 10% of the purchase price.• Pin down an anticipated closing date.• Obtain the Buyer’s financial statement (assuming you did not receive during the qualifying process).• If you receive an offer less than your asking price, be kind to the buyer and explain the importance of your original purchase price. Unless the buyer increases his offer it’s important to tell the buyer you need some time to think about his offer. • Remember that if you and/or the buyer need to make changes to the purchase contract it is important to obtain initials and dates on the contract Control again is the key. It has been said that the easier part of business sales is getting the Buyer to make an offer, and having the Seller accept it. There is much truth in this. However, you must learn not only to resolve problems, but also to anticipate them by interpreting the series of events that have brought you to this point in the sale. Only then will you be able to maintain control, and your business will sell. Neither high pressure nor low-pressure sales techniques, nor a combination of them, nor your brand of selling will carry much impact without anticipation and control.What to look for? Buyer’s Remorse: Buyer’s remorse in varying degrees will be inherent in every sale. A Buyer will always question the decision he has made or is about to make. Count on it, anticipate it, and control it. Buyer’s remorse will peak immediately after or shortly after he/she signs the contract. He may become aware of all of the things that can go wrong, he may feel uneasy and unsure of his decision, he may remember all of the little things he forgot to check into that he now feels will create grave consequences to him. It is up to you to anticipate and control buyer’s remorse: • Earnest Money: We strongly recommend not taking a check until the moment you are ready to write a purchase contract. We know the writing of this check may serve as a possible catalyst to a potential severe Buyer’s remorse syndrome. Because this is anticipated, we can control it by not asking for this check until the proper time. Some sellers and most brokers will, for example, require a Buyer’s earnest money check before allowing the Buyer access to the business books and records. Do not do business this way! And in the event that the Buyer himself offers an earnest money check to you, refuse it until the proper time. • Contracts with Contingencies: Again, since we anticipate and are aware that Buyer’s remorse may appear, we can control it. Do not write contracts with contingencies or conditions. Before the ink is dry, Buyer’s remorse will begin and your contract may well turn out to be worthless. When a purchase contract is executed, it must be a totally binding document. 1. Company Financial Information - Buyers will often insist on making an offer subject to an accountant’s (or the Buyer’s) examination of the business books and records. Insist that the books and records be checked prior to the contract.2. Lease Assignments - Before writing the contract, talk to the landlord. Introduce him to the Buyer if necessary. Obtain at least a verbal ok from the landlord that he will approve the assignment. But again, anticipate and control. Do not write a contract subject to approval of lease assignment.3. Financing - If the Buyer is to assume a bank credit line, bring the Buyer to the bank before writing the contract. If the Buyer is to assume equipment leases, pre-qualify the Buyer.4. Attorney Review – The Buyer will almost always request the opinion of their attorney for advise and draft the purchase contract. Tell the buyer that you were not only going to recommend that they consult an attorney, but that you were going to demand it anyway. You will win big immediate points with the Buyer. But again, anticipate and control. Most likely this will be a contingent item in the contract. Try to keep the date of attorney’s review less than one week from mutually agreeing to the terms of the contract.Also, as discussed before if you review a sample purchase contract early in your sales cycle with the Buyer the purchase contract will be less intimidating.5. Miscellaneous - Eliminate all contingencies, actual or potential, before writing a contract.Back to Top 10. Handling Buyer's Remorse Be proactive in controlling Buyer's remorse. Create a psychological advantage. When you inform the Buyer that you do not take earnest money checks until the time of contract or write contracts with contingencies, the Buyer will be impressed. He will feel that you are trying to help him, not pressure him. Tell the Buyer that you insist that “all cards be on the table” before you will even discuss a contract or check. You will win big points with the Buyer and strengthen your rapport with him by dealing in this way. But more importantly, you will have held off possible Buyer’s remorse until the proper time. You will have anticipated and controlled it.Back to Top 11. Lawyers And Accountants It’s very important to understand that sometimes lawyers and accountants probably will not recommend a Buyer to purchase a business. If the Buyer acts on such advise and the business subsequently fails, the Buyer might choose to sue the lawyer or accountant on the grounds that they sought and paid for professional advice, acted on it, and lost all their money. Lawyers and accountants operate under a license to practice and they are extremely protective of it. However, if you were searching for business buyers I would still recommend contacting you personal attorney and/or accountant.Many attorneys and accountants that I have worked with attempt to be professional in structuring a transaction. Usually they will attempt to find a win-win scenario. If possible, try to develop a friendly relationship with your buyer’s professional council. However, most attorneys and accountants representing the Buyer will maintain a distance so that they can control negotiations relating to their client’s transaction. Many times you would be better off hiring a professional advisor to assist in handling your negotiations with the Buyer and/or Buyer’s legal council. Also, if the Buyer begins to distance themselves during the negotiation stages it may be helpful to have your professional advisor handle the negotiations.
5. Evaluating Your Financial Statements
The procurement and reliability of your financial statements is the single most important factor that affects the ultimate sale of your business. From time to time, Buyers have a sense that Sellers will attempt to inflate the profitability of their businesses, and only in rare cases will the Buyer not want to examine the Seller’s books and records. This section will provide an introduction to the analysis of financial statements. The financial statement is defined as a report that accurately discloses the financial results of the business at the end of a fiscal period, usually a year. This statement includes the income statement, balance sheet, statement of retained earnings, and a statement of changes in financial position. It is recommended that the financial statement includes these statements, but it is sometimes impossible to obtain all the required reports, especially the statement of changes in financial position. Therefore, it is recommended that the income statement and balance sheet be acceptable for analysis purposes. 1. Income Statement. The amount of net income earned during a fiscal period, usually a year.2. Balance Sheet. This statement of assets, liabilities, and capital discloses the financial condition of the firm on a specific date.3. Statement of Retained Earnings. This statement contains the accounting period covered and shows the beginning balance in retained earnings, income earned for the period, dividends distributed, and the ending balance. This statement gives the reader full disclosure about the affect of earnings, losses, and dividends on the stockholder’s equity. 4. Statement of Changes in Financial Position. This statement is required by the Accounting Principles Board and is to be prepared in addition to the other statements to fully disclose the financing and investing activities as well as the changes in financial position if users are to make informed decisions about the business. This statement must show the inflow (source) of all financial resources, the outflow (application) of funds, and the net increase (or decrease) in the funds during the fiscal period. 5. Income Statement. The main purpose for analyzing this statement is to determine revenues earned, the costs incurred in earning these revenues, the operating expenses, and the resulting net income earned for the period. The main objective is to determine the earning stream or cash flow of the business. Keep in mind that we are not concerned with overall performance standards, but the extent of the earnings stream prior to debt service and tax write-offs. This is being done to establish the Buyer’s cash flow. • Revenues. These are analyzed and recorded from the sales (top position) of the statement. A distinction must be made to determine the accounting method being used (cash or accrual).• Cost of Goods Sold. This section determines the cost of goods manufactured or sold, and relates to beginning and ending inventories. It should be mentioned that inventory methods can either overstate or understate the cost of goods sold disclosed on the statement, and therefore, inventory costing methods should be disclosed and final ending inventory based on physical counts and methods agreed upon.• Gross Profit. This is determined by subtracting cost of goods sold from revenues and should be compared to industry averages.• Operating Expenses. These expenses include fixed overhead and total operating expense of the business.o Officer’s salaries should be added to net income to determine cash flow. (This refers to the corporation, as the proprietorship does not expense Owner’s Draw).o Depreciation and Amortization should be added to net income because it represents an accrued expense for income tax purposes and does not affect cash flow.o Interest expense should be added to net income if current debt will not be assumed. In most cases the Buyer is purchasing the business free of encumbrances resulting in a new interest expense.o Automobile expense is added to net income.o Officer’s life insurance is added to net income.o Fringe benefits are added to net income. Is the owner writing off expenses that are not essential to the daily operation of the business? Are there personal expenses that are not necessary? Does the owner purchase equipment for home use and expense it through the business? Does the owner contribute to an officer’s pension or insurance fund?• The above items are needed in determining true cash flow of the business. In most cases the Seller will respond favorably to these questions.6. Balance Sheet The balance sheet is an integral part of the financial statement, which shows the financial condition of the business as of a specific date. This report indicates the assets, liabilities, and owner’s capital, usually at year-end. Specifically, it indicates how the profits shown on the income statement have been invested into the business. The following equation can be used to illustrate the nature and use of the balance sheet:ASSETS = LIABILITIES + OWNERS’ EQUITY Assets are the economic resources owned by a business that are expected to assist in the earning of revenues in the future. Liabilities are financial obligations to outside creditors. Owners’ equity is the claim the owners have on the assets of the business. The assets of a business are generally subdivided into the following categories:o Current Assetso Investmentso Property, Plant, and Equipmento Intangible Assetso Other Assets The Balance Sheet can be analyzed to determine a firm’s liquidity (short-term debt paying ability), profitability, leverage (the extent the firm is financed by outside creditors), and equity. It is recommended that the tests for liquidity and profitability be performed prior to recommendations or advice on valuation. Current assets can be compared to current liabilities to determine the short-term debt paying ability of the business. If this ratio is less than 2 to 1 then it is recommended that the composition of current assets and current liabilities be analyzed further because the firm is in a very non-liquid position. In addition, the inventories should be subtracted from current assets and compared to current liabilities for another test for liquidity. (A favorable rating would be 1:1.) Liabilities are shown as current liabilities and long-term liabilities. The owners’ equity section of the balance sheet differs depending on whether the business is organized as a proprietorship, partnership, or a corporation. Liabilities are separated into current (due within 12 months) and long-term (due longer than 12 months). 1. Accounts payable includes current obligations of the firm for operation expenses and the purchase of merchandise.2. Sales taxes & payroll taxes payable are current tax obligations that must be paid during the current year. The business is responsible for these obligations even during a change in ownership.3. Notes or contract payable are debts (secured or non-secured) owed to banks, financing institutions, or individuals. The amount on the balance sheet is the principal balance as of the balance sheet date. Owners’ Equity or Net Worth is defined as the assets less total liabilities. This section will be called “Stockholder’s Equity” in a corporation and “Capital” or “Owners’ Equity” in a proprietorship or partnership. In the corporation, the stock issued and outstanding will be shown in addition to current earnings and retained earnings. SUMMARY: The recommended analysis has included some basic methods for determining the financial health of the business and to assist in the sale process. In addition, it also provides valuable information required in the negotiations between Buyer and Seller. It is recommended that financial statements be obtained or compiled from the Seller’s records to establish the “true” earning stream of the business. 6. How Do You Find Qualified Buyers For Your Business There are many ways to find qualified buyers who will make bona fide offers on your business while maintaining your confidentiality. As a business owner and a company salesman of your products and services you will need to keep the same type of thinking when you're interested in selling your company. Marketing your business for sale is no different than marketing your existing products and services, except you will target a different buying audience and sell your company business plan and successes. If you do not have a formal company business plan you may want to develop a professional marketing portfolio of your company. This marketing portfolio includes: 1. an introduction, including a company overview2. a brief company history3. key management profiles, including salaries and benefits4. your client profiles, including previous and prospective revenue/gross profit analysis5. copy of client contracts; highlight key contractual points 6. company insurance analysis7. equipment list, including serial numbers and fair market values8. copy of lease9. copies of tax returns and financial statements (five years preferred)10. analytical review of financial statements and key financial statistics, including graphs11. cash flow analysis12. digital and social content marketing 13. other important company information relating to the sale of the company Please contact a marketing representative at 740-602-0524 or with additional questions and/or to request a sample marketing plan for your review. When searching for a qualified buyer of your business you will, in most cases, keep your search confidential. Begin with contacting your professional advisors. Many times your CPA, attorney, financial planner, or personal banker may have a client or friend seeking a business to purchase. Sometimes attorneys and accountants will not make recommendations at all. Refer to Lawyers And Accountants below. These professional advisors have always been an outstanding source for referrals. In fact, your professional advisor(s) usually have an excellent understanding of your company and do an outstanding job selling your character to prospective business buyers. Second, depending on your salesmanship or personal time commitments you may want to be represented by an experienced business broker to assist you in searching for qualified business buyers and closing the sale of your business. A well-networked and experienced business broker or intermediate will answer your questions throughout the sales cycle and make you feel comfortable with the sales process. Additionally, the steps leading up to the sale of your business will be kept confidential by a majority of business brokers. Most business brokers will use a confidentiality agreement prior to providing important company information. Also, the negotiation process helps when you have an intermediary pulling both parties together. For example, John Doe, business owner, is presented with an offer to sell his business to Bill Smith, business buyer. The intermediary presents the contract to John Doe. John Doe was initially looking to sell his business for $675,000. Bill Smith made a formal written offer for $425,000. John was extremely upset with the offer. The intermediary explained to John that he had three options:1. accept the offer2. reject the offer3. or, make a counter-offer. The intermediary was able to have John make a counter-offer of $650,000 in writing. Bill accepted John's counter-offer and the transaction was completed. This is the key reason you would need the help of an intermediary. Even if you find a qualified business buyer interested in making you a bone fide offer you may want to invest in an experienced professional advisor who has experience with handling contract negotiations. You may find that outstanding negotiators will pay for themselves. Business brokers typically charge 10% of the sales price at closing. Please refer to Learn How To Close The Sale to learn more about closing the sale on your own. A third way to find qualified buyers is to advertise your business for sale. Advertisements should be brief and bring out the best and most saleable points of your business. It is advised that you keep your name confidential; however, it is appropriate to indicate the category of business being offered for sale. Ads should show the price of the business along with the dollar amount required for the down payment. The net should also be mentioned. If the net is not really that solid, you may choose to advertise other features of the business. It’s important to write down all your features of the business as well as the benefits. If there are numerous assets, or if the asking price is less than the total assets included in the sale, say “Below asset value” or, for example, “$80,000 worth of assets for $60,000 total price”. Remember your ad should be catchy and draw the attention of the reader. You want to include just enough information to draw the readers’ attention and curiosity. Where to place Ads: Internet Advertising. This is becoming an economical and effective choice to market your company. The internet offers coverage 24 hours a day and seven days a week. Also, you can advertise more details about your company. • Please contact a marketing representative at 740-602-0524 or if you have questions and/or if you would like to advertise your business in PriceYourBusiness.Com. Local Newspapers. The major local newspaper is historically the very best choice. Typically, most newspapers have a “Business Opportunities” classification. I strongly recommend the Sunday newspaper. Telephone responses and qualified buyers are without question best from this edition. The Monday and Wednesday editions are a good secondary choice to attract calls. National Publications. Advertising in the publications (i.e. The Wall Street Journal) is expensive but sometimes worthwhile, especially when dealing with a business whose sales price is a substantial six-figure sum or more. Trade Magazines/Other Local Publications. Use these only as secondary sources. Historically, response to these ads has been minimal. 7. Learn To Qualify Your Buyers Quickly One of the most serious mistakes you can make is trying to sell your business to a Buyer who is not qualified to purchase your business financially, or within a suitable time frame. When you completely qualify a Buyer, you may then determine if he or she is really a Buyer, what type of business a Buyer wants, follow-up with the Buyer properly, and control the sale. 1. Determine the buyer’s precise liquid cash position. Don’t be mislead by a claim of borrowing power or potential financial assistance from family or others. Their cash on hand is the only important factor!2. He/She may be interested in purchasing a business that might relate to a happy time in his life such as working as a mechanic when he was in high school or college.3. Explain to the Buyer that there is no such thing as a perfect business.4. Fully explain the concept of Buyer’s remorse.The following is the information you MUST obtain from your prospective Buyer.• How long has your Buyer been looking for a business?• Buyer’s work history (husband and wife).• Cash available to invest in a business.• Does the Buyer have to arrange for a loan for use as a down payment?• Type of business Buyer has been investigating.• Is location important?• Will the Buyer take an active roll in the business?• Hobbies of the Buyer (husband and wife).• Why does the Buyer want to buy a business?• Financial statement (Eliminates surprises down the road).• Income required from business. Miscellaneous – A Few Additional Items to Expect and Control: The Spouse – The spouse must be involved from the outset. Without her blessing, there will be no sale. Anticipate and control this. When you are with the man and his wife, focus your attention and conversation on her. Recognize that the wife is the one who will generally make the ultimate decision. Do not pressure your prospective Buyer. Suggestions are more effective. Listen, Listen, Listen. The problem with most people is they like to talk to the extent that they do not listen to what the Buyer says. A sale should fulfill a “need” or “desire”. What is the Buyer’s “need/or “desire”?
8. Sell Your Business To Qualified Buyers Remember, a Buyer always buys the salesman first, and the product second. Establish complete honesty as your priority. Never make the mistake of bending the truth. You may win initial points with the Buyer by raising their hopes, but in the end, when all the facts are known (and this will always be the case), you will have destroyed your rapport with the Buyer and decreased the possibility of closing your sale. Follow these steps after you have qualified your Buyer, and, after your prospective Buyer has an interest in your business. Arrange for a physical tour of your business premises (a confidentiality agreement should be signed prior to releasing additional company details and/or company tour). Please contact a marketing representative at 614-799-1140 or with additional questions and/or to request a sample confidentiality agreement for your review. I strongly encourage that your spouse attends the meeting with your prospective Buyer. Remember, 99% of the time it is the spouse who will make the ultimate decision. Control the initial portion of the meeting. Encourage a dialogue between yourself and the Buyer. It’s important that you get comfortable with the Buyer. When the meeting comes to a closure it’s important for you to ask the Buyer what he really thinks. Listen and take notes. If the Buyer displays a negative reaction, find out why. If their feelings are strong, don’t try to talk your Buyer back into it. If your Buyer keeps coming back to your business or continues a dialogue, you will know your Buyer is truly interested and wants you to play the role of talking them back into it. Don’t succumb to this. Make your Buyer talk you back into discussing your business. If you’re Buyer has a favorable attitude towards buying your business, find out why and close. Suggest other opportunities. Get your Buyer to fight to continue the conversation on your business. Find out exactly what needs to be done to complete the sale. Then establish an orderly program to overcome the Buyer’s objections. Learn to “Line up all the ducks in a row and then knock them down.” ReversingReversing is defined as a method of accomplishing a desired result, wherein the user “takes away” the sought after result he wishes to achieve. The motive: to make the person fight to “get it back”. Reversing can be an extremely powerful tool for you to use under appropriate circumstances, if used properly. Example situation: Your Buyer, Bill Jones, has executed your purchase contract and receipt Thursday morning. By Thursday afternoon, you have accepted and you have placed the sale into escrow. At 8:00 pm that night, the Buyer calls you at home and explodes with Buyer’s remorse. He tells you he is uncomfortable and panicky about the sale. What do you do? The worst approach: While on the phone you say, “Well, Bill, tell me precisely what is bothering you. I’m sure we can work it out.” This approach will probably do you no good whatsoever. First, you will never accomplish anything on the phone. Only one-on-one contact will work. Second, listening to his/her complaints and trying to correct them will probably not work. The reason – emotions are now heavily in play. Common sense explanations will serve only to worry the Buyer more. He will become extremely defensive and withdrawn. A much better approach: “Bill, you are obviously upset. I doubt that we’ll be able to accomplish much on the phone now. I’ll be in my office at 9:00 am sharp in the morning. Why not meet me and we’ll discuss this at length.” (Take pressure off.). When Bill arrives at your office, tell him, “Bill, I’ve been thinking this over. You are obviously uncomfortable about the sale and I certainly wouldn’t want you to proceed. So let’s just forget about it. You may want to evaluate some other companies on the market. Your immediate goals: Take the pressure off! Your more immediate goals: to make the buyer fight to re-open the conversation on the contracted sale. He may say “But I signed a contract. How can we just forget about the sale?” Your reaction, “Don’t worry”. REMEMBER: The longer you “take it away”, the better your result should be in “reversing” the Buyer back into the sale. Your best chance at accomplishing this is by removing the pressure. The tactic of, “You’ve signed a contract, you’re stuck, it’s too late," will only make the Buyer defensive and drive him to an attorney. Reversing really takes courage but it works much more often than not. Continue the process. Anticipate what might be causing the Buyer's concern. Deal immediately with those concerns, even if they are only potential concerns. If you do not, they will grow into concerns that will block an ultimate sale.Continue to anticipate. For example, if the Buyer has not purchased a business before, he may be unfamiliar with the paperwork to come. Give him a copy of an old contract. Let him take it home so that when the time comes for him to sign the purchase contract, he will not be afraid of its appearance or content. Control the initial portion of the meeting. Encourage a dialogue between yourself and the Buyer. It’s important that you get comfortable with the Buyer. When the meeting comes to a closure it’s important for you to ask the Buyer what he really thinks. Listen and take notes. If the Buyer displays a negative reaction, find out why. If their feelings are still strong, don’t try to talk your Buyer back into it. If your Buyer keeps coming back to your business or continues a dialogue, you will know your Buyer is truly is interested and wants you to play the role of talking them back into it. Don’t succumb to this. Make your Buyer talk you back into discussing it. If you’re Buyer has a favorable attitude towards buying your business, find out why and close. Suggest other opportunities. Get your Buyer to fight to continue the conversation on yours. Find out exactly what needs to be done to complete the sale. Ask yourself, “’What is stopping the buyer?” Then establish an orderly program to overcome the Buyer’s objections. Learn to “Line up all the ducks in a row and then knock them down.” 9. Learn How To Close The Sale If the Buyer contacts you and is very interested in making you an offer either by a letter of intent and/or a formal purchase contract. Please follow the following steps: • Calm down and take a deep breath.• Make certain there are no contingencies in the sale. The buyer can cause a lot of emotional pain by requiring you to go through hoops and no sale will come out of it. If contingencies cannot be avoided please strongly advise that these contingencies must be taken off within ten days.• Request an earnest money check, which should be made to the escrow agent. I would ask for minimum 10% of the purchase price.• Pin down an anticipated closing date.• Obtain the Buyer’s financial statement (assuming you did not receive during the qualifying process).• If you receive an offer less than your asking price, be kind to the buyer and explain the importance of your original purchase price. Unless the buyer increases his offer it’s important to tell the buyer you need some time to think about his offer. • Remember that if you and/or the buyer need to make changes to the purchase contract it is important to obtain initials and dates on the contract Control again is the key. It has been said that the easier part of business sales is getting the Buyer to make an offer, and having the Seller accept it. There is much truth in this. However, you must learn not only to resolve problems, but also to anticipate them by interpreting the series of events that have brought you to this point in the sale. Only then will you be able to maintain control, and your business will sell. Neither high pressure nor low-pressure sales techniques, nor a combination of them, nor your brand of selling will carry much impact without anticipation and control.What to look for? Buyer’s Remorse: Buyer’s remorse in varying degrees will be inherent in every sale. A Buyer will always question the decision he has made or is about to make. Count on it, anticipate it, and control it. Buyer’s remorse will peak immediately after or shortly after he/she signs the contract. He may become aware of all of the things that can go wrong, he may feel uneasy and unsure of his decision, he may remember all of the little things he forgot to check into that he now feels will create grave consequences to him. It is up to you to anticipate and control buyer’s remorse: • Earnest Money: We strongly recommend not taking a check until the moment you are ready to write a purchase contract. We know the writing of this check may serve as a possible catalyst to a potential severe Buyer’s remorse syndrome. Because this is anticipated, we can control it by not asking for this check until the proper time. Some sellers and most brokers will, for example, require a Buyer’s earnest money check before allowing the Buyer access to the business books and records. Do not do business this way! And in the event that the Buyer himself offers an earnest money check to you, refuse it until the proper time. • Contracts with Contingencies: Again, since we anticipate and are aware that Buyer’s remorse may appear, we can control it. Do not write contracts with contingencies or conditions. Before the ink is dry, Buyer’s remorse will begin and your contract may well turn out to be worthless. When a purchase contract is executed, it must be a totally binding document. 1. Company Financial Information - Buyers will often insist on making an offer subject to an accountant’s (or the Buyer’s) examination of the business books and records. Insist that the books and records be checked prior to the contract.2. Lease Assignments - Before writing the contract, talk to the landlord. Introduce him to the Buyer if necessary. Obtain at least a verbal ok from the landlord that he will approve the assignment. But again, anticipate and control. Do not write a contract subject to approval of lease assignment.3. Financing - If the Buyer is to assume a bank credit line, bring the Buyer to the bank before writing the contract. If the Buyer is to assume equipment leases, pre-qualify the Buyer.4. Attorney Review – The Buyer will almost always request the opinion of their attorney for advise and draft the purchase contract. Tell the buyer that you were not only going to recommend that they consult an attorney, but that you were going to demand it anyway. You will win big immediate points with the Buyer. But again, anticipate and control. Most likely this will be a contingent item in the contract. Try to keep the date of attorney’s review less than one week from mutually agreeing to the terms of the contract.Also, as discussed before if you review a sample purchase contract early in your sales cycle with the Buyer the purchase contract will be less intimidating.5. Miscellaneous - Eliminate all contingencies, actual or potential, before writing a contract.Back to Top 10. Handling Buyer's Remorse Be proactive in controlling Buyer's remorse. Create a psychological advantage. When you inform the Buyer that you do not take earnest money checks until the time of contract or write contracts with contingencies, the Buyer will be impressed. He will feel that you are trying to help him, not pressure him. Tell the Buyer that you insist that “all cards be on the table” before you will even discuss a contract or check. You will win big points with the Buyer and strengthen your rapport with him by dealing in this way. But more importantly, you will have held off possible Buyer’s remorse until the proper time. You will have anticipated and controlled it.Back to Top 11. Lawyers And Accountants It’s very important to understand that sometimes lawyers and accountants probably will not recommend a Buyer to purchase a business. If the Buyer acts on such advise and the business subsequently fails, the Buyer might choose to sue the lawyer or accountant on the grounds that they sought and paid for professional advice, acted on it, and lost all their money. Lawyers and accountants operate under a license to practice and they are extremely protective of it. However, if you were searching for business buyers I would still recommend contacting you personal attorney and/or accountant.Many attorneys and accountants that I have worked with attempt to be professional in structuring a transaction. Usually they will attempt to find a win-win scenario. If possible, try to develop a friendly relationship with your buyer’s professional council. However, most attorneys and accountants representing the Buyer will maintain a distance so that they can control negotiations relating to their client’s transaction. Many times you would be better off hiring a professional advisor to assist in handling your negotiations with the Buyer and/or Buyer’s legal council. Also, if the Buyer begins to distance themselves during the negotiation stages it may be helpful to have your professional advisor handle the negotiations.