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The importance of building trust with buyers

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February 9, 2023

When people get ready to sell their businesses, there is typically a natural inclination to talk up their business to make it seem attractive in the eyes of the buyers.

Whether a seller has been preparing to sell their business for years, or they receive an unexpected offer, this tends to be the case.

It’s only normal a seller will want to build up their business and make it seem as flawless as possible.

However, it’s an interesting dynamic to consider, because while sellers are motivated to convince prospective buyers to take action, they also need to remain honest.

When sellers try to hide or cover up a company’s flaws, it can come back to haunt them.

After all, almost all buyers will be taking ample time to determine if claims are valid and to investigate the business for themselves.

It’s a two-way street
Along the same lines, sellers will want to trust buyers are reputable and qualified.

After all, why waste time dealing with a prospective buyer who is not serious about buying or qualified to do so?

Honesty is essential on both sides of the transaction.

Honesty and transparency
Before signing on the dotted line, buyers will take a deep dive into a company’s stability, finances and growth potential.

If along the way a buyer finds a flaw that was not disclosed, it will negatively impact the seller’s credibility and can jeopardize a deal.

If the seller’s honesty ever comes into question, even the best deals can quickly fall through.

Unfortunately, deals can fall through even when business owners fail to disclose issues, they consider relatively minor.
After all, it’s possible a buyer will have a different interpretation of the relevance of those flaws.

So, what is the best way to proceed?

When both the buyer and seller are transparent, it can dramatically improve success rates.

This means all parties involved should seek to be open about the risks but also be clear about potential solutions.

When this goal is achieved, it typically benefits business transactions.
How to build trust
If a buyer finds out an important item was not disclosed, suddenly every statement made raises skepticism and concern.

As you might imagine, that may jeopardize the chances of almost any deal succeeding.

That’s why sellers and their representatives should be clear about any concerns and put them on the table along with potential solutions.

Consider if the business could run into problems down the line and share those details with buyers, but also present possible resolutions.

Think about whether you have made mistakes in the past with the business that could circle back and become an issue for your buyer.

Being proactive about not only sharing problems – present or potential – but also sharing possible ways to solve those problems can be essential to a deal’s success.

Again, be sure to be clear and transparent about those issues and potential resolutions.

Try to put yourself in the buyer’s shoes and think about every issue you would want to know about before purchasing the business.

Maximizing success rates
By following these guidelines, it’s likely sellers will see their odds of success increase.

Trust is an undeniably large part of the equation.

Sellers need to go against any instincts they might have to hide information, and instead be as forthcoming as possible.
After all, once trust is broken, little can be done to rebuild it.

One thing business brokers and merger and acquisition advisors constantly see that works against deals of all sizes is a surprise.

While surprises may be welcome in other areas of life, they have no place in the world of buying and selling businesses. 

Michael Schwantes is president & CEO of Creative Business Services/CBS-Global.

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