Initial Discussions In Buying A Business

Article by: Jay
Last updated: Tuesday, 11-Jul-2006 00:00:00 CEST

When you have selected a business that is for sale after reading up the details including Profit & Loss information, the next step is to meet the vendors for initial discussions, preferably after normal working hours at the business premises.

Initial Discussions - What You Need To Find Out

When you have selected a business for sale and after reading up on the details available including Profit & Loss information, the next step is to meet the vendors for initial discussions, preferably after normal working hours at their premises.

Initial discussions enable you to find out, in general, how the business operates, what the vendors are like and how you might fit in with them and whether you feel the business could be suitable to you and match your skills and experience.

These talks are vital so take the time to ask questions, listen very carefully to what is said and how your questions are answered. Take as many notes as you can for future reference and contemplating on after the initial discussions.

The body language can often be revealing during intial discussions, especially when asking any "awkward" questions. Ask what the vendors intend to do once they have sold but try not to tell them how they should or could have run their business. This can be perceived as insulting and put any vendor off dealing with you. In a lot of cases, it is the the pride and joy of the vendor(s) and they want to be assured that the business and their workforce will be looked after in the future.

The initial discussions also allow the vendor to see whether they can work with you and if you will take over where they plan to finish off. Will you be able to complete the deal is another question that could be foremost in the vendor's mind during these initial discussions. How will you fit in with them and can they complete an effective handover with you. If they don't ask any questions of you, give them the opportunity to do so. Initial discussions are a two way method for finding out whether the both parties have the will and ability to progress the deal.

Be Patient

Some people only ever sell one business, and therefore don't quite know how to go about it. The initial discussions can sometimes be a little awkward because of this but if there's a broker involved, then s/he usually help the discussions to get started and to flow. They will probably have been present at a number of initial discussions and seen how people do or don't get on, observing the body language on both sides. It is in the broker's best interest to try to match willing buyers and willing sellers during these initial discussions.

This is also a good opportunity to see the premises and gain a better understanding of how the operations work. Look out for staff facilities, how clean and tidy things are. Any other tell tale signs of how things are run can be very useful. Ask plenty of questions take an interest in what you're shown and try to direct questions to both parties if there is more than one vendor. Try to ensure you involve all parties in the initial discussions to get a good idea of how they operate in such situations

At this initial discussion stage it's usually best not to discuss the price but try to find out what opportunities there could be to develop the company and how they see the handover period. These items in particular can help all parties to decide whether to go beyond the intial discussion stage.