Finding a business to buy isn’t terribly difficult… There are more than 2.6 million for sale in the U.S. and U.K. alone.
And if you’ve set up your deal origination funnel to run like a well-oiled machine, you should have a constant stream of high-quality, off-market opportunities coming to you from all directions.
When you find a business you want to buy that fits your dream deal specification, the next step is to meet with the seller.
That first meeting is CRITICAL.
Aside from establishing a relationship and building rapport, there is ONE key question you must ask the seller right out of the gate.
In fact, there are three killer questions you must ask the seller in that first meeting… This is just the first.
It’s only FOUR words…
But it will set the stage for the REST of the conversation.
WHY ARE YOU SELLING?
A simple question, right?
But it is vitally important.
Remember my Perfect Deal Triad?
It shows the three pillars of a perfect deal:
- ONE — The deal fits your requirements (sector experience, knowledge, passion)
- TWO — The seller is a motivated or distressed owner of a GOOD business
- THREE — The business’s financial profile will facilitate a leveraged buyout (LBO).
All three criteria are important in the making of a perfect deal, but No. 2 is the key.
And the only way to learn if the seller is motivated is to talk to them — and listen to what they have to say.
It might not be just money that they are looking for…
Your job is to find out what the seller really wants so you can structure a KILLER deal that will be a win for everybody.
So ask them — why are you selling?
This will tell you the seller’s TRUE motivation.
From my 27 years in this business, here are the most common reasons the owner of a good business wants to sell…
- Illness, perhaps terminal — and not just the seller, but family members too
- They’ve run out of ideas
- Other priorities or exciting ventures to pursue.
Of course, there are sellers who just want cold, hard cash and don’t really care about the future of their business. I’d say about 20% of all sellers fall into this category.
We let those folks go.
It will be much more difficult to structure an LBO deal if the seller is only interested in a big closing payment.
Your goal is to find a motivated owner who values other things besides money. Like…
- Their legacy
- Their business’s brand
- Their business’s reputation
- Safeguarding the future of their employees
- Protecting their customers — some of which are probably friends of the owner.
If you can find the perfect motivated/distressed seller of a GOOD business — and you can determine what it is they value — it will make structuring the deal super-simple.
And it all starts with this four-word question…
Why are you selling?
Because every business is for sale — it just depends on the offer.
Until next time, bye for now.
Editor and co-founder, Dealmaker Wealth Society
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