Many times a business will look “out of reach” because the offer prices are higher than you can reach with your resources.
When buyers see a high offer price, they opt not to put in an offer because they believe “the seller will go for the highest price. Why waste my time?”
Keep in mind:
Price is rarely the most crucial factor to get a seller to say “Yes”
I’ve yet to acquire a company and been the highest offer.
Not that I don’t try to offer the best price with the best terms. Yet, so far, my offers have always been lower than the highest price, yet I was still able to close on the business.
There are dozens of factors that can be more important than price.
Here are five factors I have used that raised my profile enough with the seller to be the buyer of choice.
#1: Financing Contingencies
Many higher offers depend on 3rd party financing (loans/SBA). A few things that have helped me:
- Verifying funds with the broker to show my cash isn’t dependent on 3rd party approval.
- Putting a percentage of the closing day payment in escrow at the LOI signing.
- Emphasize other factors more important than $$$ to the seller…see👇🏼
#2 – Easy Exit & Flexible Closing
Most sellers value easier exits and flexible closings.
– Do this → Under-complicate the process for the seller, i.e., do the complicated and annoying stuff so they don’t have to themselves.
For example, provide templates of what you’ll need at closing to make the transfer quicker and easier.
– Do that → Roll with flexible timelines to make the seller’s life easier.
I don’t usually let others interfere with my schedule, but I’ll adjust my life around a seller’s schedule for these types of situations to help ease the closing.
#3: Respect the Team & Mission
Some sales are the result of life unplanned life events.
Having to sell when not expecting it can throw many non-monetary concerns into the mix.
Most likely, employees, contractors, and the business’s mission are still at the forefront of the seller’s mind.
When you suspect other buyers will:
1. Gut the business.
2. Move the work overseas.
3. Treat their customers as dollars, not partners.
Be the solution:
– Learn the seller’s mission and make sure you want to continue it.
If yes, outline your plan to the seller of how you will continue pushing forward with their original mission.
– Keep their team where workable.
You may have redundancy or other conflicts, be upfront about them and help the seller know the team will be taken care of long-term.
– Be a conscientious person who empathizes with the seller.
Don’t be a PE firm.
#4: Cash on Closing
Emphasize the importance of Cash at closing as money in the seller’s bank, full stop.
Holdbacks, seller-financed loans, earn-outs, equity shares…
Ask any Amazon FBA seller who sold to aggregators in 2021-2022 how much of those earn-outs they received in 2023.
Ask in private, of course.
#5: Taxes
Tax implications are different for every seller.
Don’t be surprised if you experience a positive reaction to suggestions like:
– Flexible terms for tax-friendly payments.
– Spread out quarterly/annual payments around tax dates and deadlines.
– Pivoting closing dates around important tax dates.
Finding ways to improve your offer can be fun, especially when it’s not the highest price.
I’m always trying to learn more from sellers about “What would make your life easier with this sale?”
Try asking that question next time you chat with an interested business seller.
Don’t stress if you haven’t attempted to buy a company yet. Save this in your memory bank for that coming day…
