19 Apr IBBA Questionnaire
A recent email from the International Business Brokers Association (IBBA) had a short questionnaire on why deals fell apart. The results were as follows:
|Unreasonable Seller Expectations||27%|
|Financing (or lack of)||36%|
|Lack of Sellable Businesses||27%|
|Lack of Buyers||10%|
Unreasonable Seller Expectations
When I initially saw the first reason listed for why deals fell apart, I thought it was a misprint: Sellers had unreasonable expectations? In fact, I was so concerned that I went back to the email and sure enough it was seller expectations. I was so sure it was supposed to be buyer expectations (more on that later). If sellers had unreasonable expectations, the fault lies directly with the person who took the listing. His or her job includes seller education. It’s hard for me to believe that the seller had unreasonable expectations – they had to come from the broker. So those 27% fell apart, not because of the economy, but because of uneducated sellers. Who is at fault? The business broker.
Unfortunately, due to most buyers coming from the various listing web sites coupled with the lack of personal contact, I could understand the buyers having unreasonable expectations. A well-trained business broker would also educate the buyer and find out or discover if a buyer had unreasonable expectations. That’s also part of the job. If a buyer has unreasonable expectations, the business broker is also at fault.
Again, when are business brokers going to learn that there is NO outside financing? The SBA will lend on a perfect business, but they are few and far apart. Once buyers and sellers find out the hoops they have to jump through, seller financing looks pretty good. One thing I have been concerned about over the years is the increasing amount of time it takes to close a deal. Outside financing doesn’t speed up the process, it only prolongs it. If buyers and sellers were told the implications of outside financing, many sellers would agree to seller financing. It’s all a matter of education.
Now, whose fault is that? Brokers take listings without educating the seller. Then they don’t contact the seller on a weekly basis. When I would check the offices I had, my concern was certainly how many listings we had (at least 15 per agent), but also how many amendments to each listing we had. Part of the job is to work diligently to try to sell the business. This means getting price reductions and lower down payments. When businesses don’t sell, usually it’s because of price and/or terms. Again, the fault lies with the brokers.
Lack of Buyers
With all of the listing web sites out there, you would think that buyers would be coming out of the woodwork. I know from experience that only about one out of 12 (and it may be higher) will actually buy a business. Business brokerage is still a numbers game. Buyers have to be nurtured, and dealing with them via the internet may not be working. I believe the business brokers who are making deals are insisting on personal contact. Maybe it’s time to go back to newspaper advertising. I’m only half kidding. I believe that to be successful you have to meet with the buyers. And, if they refuse to meet, move on to the next one.
It’s time for brokers to move out from behind the desks and computers and go out and work personally with the buyers and sellers. To a great extent, we are educators, and if we educate properly, all of the problems listed above will go away – almost!