As mentioned in the last article I posted, associated with the lack of attention to detail is the reluctance for people to read documents before they sign them. Why don’t they do that?
I think there are a number of reasons! One is the lack of time. Everyone is in a hurry and they may feel pressured to sign rather than spend the time in the meeting ‘reading the detail’. They may feel that taking the time to read everything shows a lack of trust in the other parties and they don’t want to be seen as ‘picky’. Whatever the reason, it can come at a cost.
These are legal and binding documents that are being signed. For example, The Agreement To Purchase comes with pages of “Standard Conditions” which are supplied to both parties ahead of finally signing. They can read them or get a lawyer to read and explain them. In most cases they are written in plain English (ours are at least!). Then there are often several or more “Special Conditions” which get negotiated and agreed between business sellers and business buyers prior to signing.
Even though we spell out the consequences of not meeting many of the terms and conditions – in the euphoria of the business sale (for the seller) and the excitement of becoming a new business owner – people forget.
TIP: Get advice before sitting down to sign ANY document. Know what you are signing and the consequences if conditions aren’t met. Ask for clarification and NEVER ASSUME!
As a seller, you will generally have more than one offer to consider. Make sure you look at any “special conditions” as these may make one offer better than another – in spight of the dollars!
As a buyer, make sure you include any conditions that protect you from post sales blues. Don’t go over the top but cover the major threats to ongoing profitability.
Typically you want to make sure;
- Plant & equipment is in good working order. Arrange for an inspection by a technician if appropriate
- Meet with employees, suppliers and major customers to make sure they will continue on
- Consider a specific Deed Of Restraint on the seller not to compete in the future
- Organise a stock take to make sure stock is correct and “saleable”
- Agree how work in progress will be reconciled. This is in standard conditions but I often recommend a specific clause detailing the agree handling of this. It can be a contentious issue if not handled well
A good broker will anticipate most things for you and explain everything – but always get a second opinion and READ WHAT YOU SIGN BEFORE SIGNING!
Want more on this and any topic related to buying and selling a business – come to my next workshop, or sign up for my mentoring group! Go to “Workshops” on this web site and select the one for you.
Helping Business Owners Achieve Their Life’s Goals Through Buying and Selling Businesses