31 Jan Working with the Seller (Part 1 of 2 — The Listing & Down Payment)
The following article was written by the “Old Pro” 30 + years ago. Russ Wright was my mentor and subsequently my father-in-law. These are the rules I learned from him many, many years ago. How things have changed!
Make it Saleable!
It is extremely important that you know why you are taking a listing and how to make your listing saleable. Don’t forget, before your listing can be sold to the public, you must sell it to yourself and your associates. Bear in mind – “expired” listings will never put one dollar in your pocket. We are not dealing here with the “mechanics” of a listing but rather, how to make it attractive and meaningful.
Include Reason for Sale
The reason for sale is one of the most important points to be covered when writing a listing. A properly handled, well written listing will be built around this one point. Why? To give the selling salesman a solid foundation on which to build his sales approach. Sooner or later most buyers will ask – why are they selling? You might consider this a question “without substance”, but you will certainly improve your listing if you can support a logical and believable reason for the sale. The seller will give it to you if you explore the subject properly.
Example: “Moving to Philadelphia.” This makes sense!
Example: “Bought this business last month – too far to travel.” This doesn’t make sense!
Make Your Listing Exciting!
Remember – you must excite the other members of your staff. Remind them of the close proximity of the Union Hall – the Post Office – a five point intersection – the local bank – tremendous foot traffic, etc. Also that the business has just been refurbished, repainted, newly carpeted and/or anything that will make him, salesman or buyer, want to buy it himself – only, however, if these things happen to be true. Misleading information of any nature, if intent or otherwise, can only cause trouble … probably for you.
The Profit & Loss Statement – How Important?
Obviously, it is of the utmost importance, regardless of how good or bad it might be. First of all, it will serve as a guide and the basis, upon which, the selling salesman can proceed. Secondly, it will, in most cases, save valuable time after the sale has been initiated, in those situation calling for the old “book check”. Why then do so many listings come in without it? The answer is simple. The average salesman fails to recognize its importance, or simply does not take the time to obtain it from the seller or his bookkeeper.
Always be sure to point out the “bad” of any business as well as the “good”. For instance: If the exterior needs paint – say so! If there is no parking – say so! Always tell it like it is. A good salesman will know how to overcome a problem and will appreciate the fact that you alerted him.
The Down Payment
In most cases, the down payment will determine the salability of a listing more than any single factor. Why then do so many listings show a down payment higher than 50% or 33 1/3 %?
Frequently, this can be traced to the timidity of the listing salesman. He may be so concerned that his listing will not be signed that he makes no attempt to convince the seller of the importance of a more ‘modest down payment”. He has probably forgotten that it is not the listing itself, but the quality of the listing that counts. Any salesman who permits a seller to “dictate” terms will discover, to his sorrow, that his “percentage of listings sold” is far below his right of reasonable expectation.
Reason #2 is more complex. It is of the utmost importance that you make him understand why a low down payment will speed the sale of his business and why a high down payment or the proverbial “cash-out” will only prolong the agony. Always remember that regardless of his stated reason for wanting “all cash”, or a prohibitive down payment, his prime or real reason is his total fear that a new owner will fail, thereby, forcing him to take the place back!
Try These Steps
A. Secure his agreement – that the sale of any major product or business is usually handled on a deferred basis. (This is a good time to ask – did he pay cash?)
B. Remind him that the average buyer, regardless of financial “cushion”, is aware of the risk involved in the purchase of a business, consequently, he is reluctant to pay more than 20%, 30% or 50% down.
C. Now is the time to remind him that if his “successor” should find himself in trouble, he would attempt to sell and thereby recover as much of his initial outlay as possible.
D. Should your seller ask – what would I do if the buyer finds himself in trouble and abandons the business? Your answer – he has two choices! Take the place back, which he probably will not want to do, or restructure his price and sell it again.
Reminder! Don’t be timid on the subject. Fire your best shots. You will win some and lose some but the additional money to be earned will astound you.
Tomorrow’s posting will continue this article with tips on educating the seller.