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Potential Landmines


What can stop a potential business sale?

The reasons business sales don't go smoothly fall into several distinct categories. By far the biggest category is personalities. 


It may be the personality of the buyer, the seller, a third party, or a combination of those.

The seller will have emotional ties to the business, its employees, customers and even the company brand itself, because they built the company. 

As a purchaser you will have your own thoughts and ideas for how to make the business "better" and how to inject your own personal identity into the brand. There is nothing wrong with that, and it is perfectly normal and understandable.  As a buyer, you want the seller to feel you are the "right" buyer. As seller, you want the buyer to feel this business is a "great fit" for their vision. 

Just keep in mind, whether you are the seller or the buyer, to be respectful of the other person's views and contributions. Additionally, be cognizant of the spouse or other family members, who may feel protective, and will share anything you say. 

Financial Issues

As buyer, make sure you have the ability to purchase the business. If you are getting bank funding, make sure you understand what the bank needs from you in order to qualify for the loan. This may mean asking the seller to provide a general idea of the assets and profits for underwriting purposes. 

As seller, you want to make sure your books and records are clean. Do you have tax liens or judgments you have to clean up? Is there a partner you are buying out? Those are issues you should address before you get too far into the process.

Contingent Liabilities

The next impediment to closing is what I lump together as contingent liabilities. Is your lease secure? What about the condition of your equipment? Are your customers pleased with your product? Are all of your governmental licenses up to date? Are there any other internal or external threats to your business that you need to address?

These are all issues that your buyer will uncover during the due diligence process. As a seller it is best to address them before you begin so they don't interfere with the closing later.

Unrealistic expectations

Finally, whether you are a buyer or a seller, avoid having unrealistic expectations. No business is perfect. There will be hurdles and obstacles. Expect them, and be pleasantly surprised when the situation exceeds your expectations.

Wrap Up

There are certainly other things that can go wrong, but these are the big ones. It is good to have someone in your corner who is experienced with business transactions to help you avoid pitfalls, and knows how to overcome them if something unexpected does arise. 

Chris Staubes is a corporate lawyer with over twenty years of experience representing business owners. If you need assistance with your business, we can be reached at chris@harborgroupsc.com