Advising Clients

We are in the business of selling businesses for owners that are looking for a qualified buyer. We don’t charge an upfront fee to find a buyer, therefore, we don’t get paid until the business sells. That keeps us motivated to do a good job, working for the buyer.

Recently, I met with the owner of an auto parts store that we had been trying to sell. This is a family business, run by a husband and wife and two sons. Neither of the sons want to make the store their career. Before listing the business with us, the owner had received an offer from the distributor that supplied his parts inventory. He had rejected their offer as being too low.

Some of the problems I ran into was that buyers did not qualify financially. They didn’t have enough cash and could not borough enough for the purchase. The prospective buyer wanted a large percentage of owner financing which the owner was not willing to offer. I know owner financing is important, but in this case, I don’t blame him. Here are some of the reasons:

  • The owner owned the building where the business was located. He was willing to give a long term lease to the buyer, which was great for the seller, but only if the buyer was successful in sustaining the business.
  • This is a small town. People have been doing business with this parts store for twenty years. The business success was built on customer service. What if the new owner began to lose customers because of poor service?
  • The owner did not want to get the business back if the new owner failed.

When I assessed all of the risk associated with the buyer prospects we had, and weighed it against the strength of the parts distributor buying the business, I told the seller that my recommendation was that he sell to the distributor. This essentially would cut us out of the picture, and result in no commission to us.

In view of the long term rent that the building will bring from the well capitalized distributor, verses gambling on the long term success of a buyer needing owner financing, I think I gave him the right advice that will result in more profit to the seller over the long run. It was the right advice and the right thing for me to do.