The excitement of owning your own business is a dream for many people.
Once a good business is found it can be easy to get caught up in the heat of the negotiations, due diligence and the usual activity that comes with buying a small business.
After the deal finally closes, however, many owners are then faced with a somewhat sobering reality - they are now business owners.
This article will examine some reasons why a purchaser of a small business may have regrets soon after closing and what can be done to mitigate it.
Why a person may have buyer remorse The number of answers to this question are as varied as there are people.
There do exists some common threads though.
- Buyer was not aware of the long hours involved, - Did not know enough about the skills required to operate the company, - Due diligence was lacking and realized more working capital is required, - Buyer does not possess the required leadership skills to run a business, or - The buyer does not have the emotional resilience to depend on an income that is purely variable (in other words, misses a regular paycheck).
These are but a few of the reasons a business broker may hear from a new owner.
If you find yourself in this situation and feel that you absolutely must sell the business you just bought, here are some things you will need to think about: Prospective buyers will be even more skeptical People shopping to buy a small business are, by nature, skeptical of any information presented to them.
A logical line of reasoning that will come forward is that there may be a problem with the business that the owner only discovered after they took over and are now selling because of it.
This is a major hurdle to tackle.
Be prepared to answer very bluntly why it is you intend to sell.
Availability of financial information If you purchase a business as an "asset sale" you may not get the full financial information of the business from the prior owner and you may not have enough of a history of you running a business for a buyer to do a thorough enough due diligence.
Work with you accountant to see what financial information will be available to show prospective buyers and you may want to work something out with the old owner as well to see if some operating metrics of the business prior to you owning it can be shared.
Transition issues When a small business is sold there is usually a period of time that the new owner trains and transitions to buyer.
If you are a brand new owner then you might be totally prepared to offer the same level of transition and training to someone compared to someone that has run a business for years.
You might not be familiar with all of the nuances to the operation and this is a genuine concern for a buyer.
Must be priced properly For the reasons mentioned above as well as others, you may need to take a financial loss on the sale of the business.
You may need to offer a discount to a buyer to help mitigate concerns and then there are business brokerage and other professional fees to contend with as well.
If you are determined to sell just after you have purchase please realize that buyer remorse can be quite costly.
Prior to buying any business do an honest self-assessment to see if you are truly up for it.
Wanting something is much different than living with something.
Talk to people that know you to get some different perspectives as well.