The Buyer Remorse Stage of Buying a Business
Closing the deal can be the most challenging part of buying or selling an operating business. Valuations, investigations, and negotiations are complete and now it’s a matter of getting everything into writing in a form that satisfies everyone so that the transfer of ownership of the business can take place. However, you can definitely count on someone getting cold feet just before the closing. Be prepared for this! Anticipate it happening and then work through it logically, reasonably and unemotionally.
Many Buyers, particularly first-time Buyers, experience a pre-closing nervousness known as “Buyer’s Remorse and Cold Feet.” It generally occurs during the Due Diligence phase. During this period the Buyer may begin to have second thoughts about the wisdom of buying the business. The train of thought may go something like, “Am I doing the right thing?” “Do I really want to get into this venture?” “Is this the right time?” “What if the current customers decide to change to another company?” “What if all of the employees quit?” “Am I paying too much for the business?” “Will I lose my life savings?”
These are not unreasonable questions. They are the emotions we all have when facing a lifestyle change or new stage in life, making a large investment, moving, buying a house, and not to be left out — getting married. Yes, operating a business certainly does have an element of risk. However, if the Buyer has followed the correct Sequence of Events, properly investigated and researched the business, negotiated a fair agreement and performed due diligence, the risk has been reduced to an acceptable level and “Buyer’s Remorse” will pass. The Buyer must remember, at this point, why the business was attractive in the first place and how well it matched personal goals and future expectations.
Planning some wiggle room is a strategic way to minimize risk and to strike a satisfactory level of comfort. Whether it’s financial wiggle room – a little bit of capital set aside for unexpected expenses like a new computer – or managerial wiggle room – the chance to meet with key employees privately before closing the deal – it heightens the Buyer’s confidence that obstacles can be overcome and goals achieved. A Buyer just can’t know all there is to know until after the sale. Because difficulties and delays are possible, planning for them should be automatic.
Ultimately, however, the proverbial “Leap of Faith” must be taken if business ownership is to ever be achieved. It is the leap that every successful business owner has survived.