After spending whatever time and energy might be necessary, you find the business opportunity that you think might be just right for you. Now you have to control the opportunity during the time it takes to be sure. You don't want to lose it to someone else and you don't want the seller to change his or her mind. At this stage many people find it impossible to think of anything except how they are going to get the money, or what price can they get the business for or if the employee they see as most important will stay. In other words they are proceeding as though they are definitely going to buy the business. This can create problems. The more you begin to think like you have bought the business the more you are likely to lose your objectivity. When this happens you are no longer able to perform an effective due diligence, the in-depth look at all the details and elements of the business. If you are looking through the eyes of an owner everything you see will either convince you that it is a great business (reinforces your decision to buy), or reveals problems that gives you instant buyer's remorse -- you begin to wish you never saw the opportunity. The due diligence effort should be used to find out as much as possible about what is going on in the business. Everything that you find out in this period should be considered in total, after you have finished. When you have completed this effort you should be able to draw specific conclusions; reject it and move on, pursue it aggressively, pursue it under certain conditions. The later is where you use the negative things you have discovered. This is where you talk with the seller and demonstrate that you know what's going on and that he or she has to adjust the price or the terms or the timing in order to make a transaction happen. Don't mention specifics; just try to get the person to be a willing participant in a preliminary negotiation. If you succeed in getting the seller to discuss the specifics of a transaction then you might consider using a document I call the Deal Points. Everything in this document would be in an Offer, or in a Letter of Intent to Purchase but because it is written in simple language, using brief statements, without the penalties for non-performance and all the legalese, the seller will normally sign it without taking it to a lawyer. That's what you want -- the seller's signature on a document. When that happens, the seller has adopted the attitude of having "sold" the business. He or she will be looking ahead to how they will spend the money and how they will enjoy all the time they will have. When the seller has this attitude in their heads -- they are much more willing to make changes -- and that's where you want them. Now when you come back after having completed your due diligence, you are ready to proceed to have an Offer prepared, if you can pre-negotiate some changes. This is when you explain why you need certain changes. "The inventory is all pretty old, I saw some items that go back two years. All of the equipment looks like the routine maintenance hasn't been done in over a year, We need to talk about the price." All the while you are working through this process you should be coming to some conclusions about how much money you will need and by when. You should be well along with ideas about where you will get the money you need and how long it will take. When you feel comfortable about these issues, the money and the time, then you can have the Offer prepared. Depending on your background and skills you should consider presenting the offer to the seller yourself. Most people have a difficult time when it comes to a confrontation, so help the seller start discussing how he feels. Select an issue you are willing to give on and ask him what he thinks. No matter what he says, don't react, be non-responsive, suggest that you both work through the entire document. In this manner he won't know if he succeeded in changing your mind or if he still has a battle to go through. The objective of this effort is to get his signature on the Offer and his initials on the changes he wants. Now you can bargain for more time. That's the only change you want in this conversation. Get him to extend the time and initial it and then pick up the Offer without signing it. Tell him you need to get your wife or partner, or the lawyer anybody, to look at it and you'll be back in however many days you can negotiate. Once you have the seller's signature and his initialed changes, you control the opportunity. The more time you can get to control the business opportunity, the more the seller will think about spending the money and taking time off. The more he does those two things, the more willing he will become to make the sale the way you want. You will find more about this topic in Chapter Twenty-One in my book. Entrepreneurs Control the Opportunity -- number eleven in a series taken from: "How to Evaluate and Profit from a Business Opportunity - The Entrepreneur's Guide" |
