Sunday, March 19, 2006

I am selling my business and one buyer has asked me to agree to a "No Shop" clause

A "No Shop" clause is part of a letter of intent in which a qualified buyer says he will pay "x, y and z" for your business, the deal will be completed by a stated date and AND the buyer wants the seller to take his business off the market and refrain from discussions with other potential buyers. Hence the term "No Shop".

It is a reasonable request from a buyer who has met past deadlines and commitments. It is not a reasonable request from a buyer who has shown signs of being unfocused, or is inexperienced, or needs multiple levels of approvals and financing to close the deal.

We recommend "no shop" periods be as short as possible. If a deal moves forward to closing at a reasonable place, the buyer and seller can agree to extend the no shop period.

Thursday, March 09, 2006

No Extra Charge For The Warts

Business owners tend to fret about small imperfections that will be identified when their business is put up for sale. I call these small and fixable items "warts". And every business has warts. A smart and experienced business buyer also knows every business has warts. That buyer will try to use the warts to negotiate a small price concession.

I encourage my clients "Don't sweat the small stuff (or warts)" and if a potential buyer sweats the small stuff, then there was really no deal to be had anyway cause that buyer is just kicking tires. If you have questions as to what constitutes a wart in your business, give us a call. We are wart experts.

Monday, March 06, 2006

Three Key Questions

Since a big part of an entrepreneur's success is intuitive, we like to give a "Pop Quiz" by asking three simple questions regarding their outlook on business in the next year or two:

Do you think your prices will go up or down or stay the same?
Do you think your expenses will go up or down or stay the same?
Do you think your sales volume (widgets, etc) will go up or down or stay the same?

The answers to these questions can tell us a lot about the client and his business.