Ten Steps to Understanding the Seller (and Making the Right Deal)


The following is adapted from Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game

After my last company acquisition, the banker supplying the SBA loan told me, “Walker, my first job is to convince prospective borrowers that we are the right bank for them, my second job is to then determine whether the loan is a good fit for the bank or not.”

His comment rang true because this is exactly what most potential acquisition entrepreneurs get completely wrong. Most inexperienced buyers fail to trust their sellers, creating an oppositional atmosphere. In this article, we’ll shoot down that myth and take you from proving it and then I’ll consider trusting you to trust but verify.

#1: Realize That Selling a Business Is an Emotional Transaction

Imagine this possible seller profile: they’ve been running their business for years. Every employee that came and went, every customer issue, every good year was because of their initiatives, and every mistake made rested squarely on their shoulders. The company has provided income to their family, bought their house, and put their kids through private schools. For whatever reason, the timing is right to consider exiting the business.

Just this one example should be enough to demonstrate that each business is a very intimate success story for the seller. They care deeply about what they’ve built.

#2: Ace the First Date

On the “first date,” your job is to convince the seller that you are the right buyer for the business because you are:

  1. Able to close a deal.
  2. Competent to manage what is currently their company and willing to get passionate about it.
  3. Willing to sit on the same side of the table as the seller and accomplish a common goal—to change ownership to you.

If you are able to convince the seller of these three things on the first call, you have already won. They will be willing to work with you.

#3: Trust That a Fair Price Will Emerge

The best buyers understand that the fair price for a business will reveal itself later in the game. And if it doesn’t, they can move on and find another one. Go in ready to play hardball and you will put your seller off. Instead, take the time to build rapport with the listing broker and the seller.

Your aim here is to show them that you are not an aloof conservative investor looking to get pitched their deal. Rather, you are good to work with, trustworthy, and able to keep your eyes on the objective—closing on a fair deal.

#4: Appreciate That Good Buyers Get the Best Opportunities

Shakespeare taught us that “all that glitters is not gold” and it’s true here too. Even if an opportunity is attractive enough for you to meet a seller, you might not end up working with this particular seller.

Whatever the outcome, nothing is lost by approaching the seller as an enthusiastic entrepreneurial partner. Establishing yourself early on as a partner and “good buyer” will also win you great favoritism with your broker. I have personally earned first looks at great opportunities many times over just from being a “good buyer.” Reflecting back, I even acquired two of them.

#5: Negotiate Price Last

You may be tempted to talk about price first. I recommend that you do the opposite. Taking this approach allows you to identify what’s important to the seller other than price. Is it the future employment of key employees? Is it the timing of the close? Is it not to hold a seller’s note?

Everyone says it’s maximizing sale price, and while that’s true, I have never seen a deal where the seller didn’t have qualitative goals. Remember, this is a highly emotional and personal transaction. Identifying the deal points other than price will allow you to know where to focus your offer.

#6: Ask the Right Questions

It’s incredibly important to do your due diligence. That means digging into the workings of the business over at least a couple of different meetings, typically including a visit to the facility.

While interviewing the seller, your objective is to determine the strengths and weaknesses of the business, the seller, and the industry. You are compiling the story behind the business: where it’s been, where it’s going, where it should be going, and what you bring to the table. Much of the benefit of this meeting will come from your ability to be an exceptional active listener.

#7: Balance Optimism with Pessimism

The tone you want to strike during negotiations is a combination of enthusiasm and concern. Be optimistic around the opportunity but make sure that you get 100 percent clear about the risks involved. This will allow you to see the opportunity as it is.

Most tire-kickers spend the entire first meeting identifying why the business is a bad investment rather than identifying the opportunity as a whole. You want to purchase a business and you’d like this to be the right one, so see the possibilities but don’t leave your critical thinking skills at the door.

#8: Look Out for Smoke Screens

Trust your seller but be alert for signs that they are unwilling to talk about any aspect of the business. One way to do this is by asking the same question a few different ways at various points in the meeting (and repeatedly in future meetings). By doing this, I am usually able to pick up new information.

People typically have a planned response for questions they want to avoid, so if you get the same, canned answer every time you ask the same question in a different way, you can figure out where you’re getting a smokescreen.

#9: Listen to Your Intuition

A friend of mine was looking for, and ultimately acquired, a product distribution company. During the process of meeting the seller, he found that he didn’t really care for the man. After closing, he discovered that the unfavorable personality traits of the seller were well established in the culture of the company. Ultimately, it took years for my friend to right the ship and get the team in harmony.

It’s important that you listen to your intuition while working with the seller. You don’t have to be best friends but sharing the same values as the seller will reflect greatly on the business.

#10: Prepare for the Seller’s Departure

Selling a business is a huge transition. Once the deal is closed, the seller will be spiritually, physically, and mentally ready to leave as soon as possible. Their attention will be elsewhere, and their role will rapidly dissolve into purposelessness.

The seller will be critical during the acquisition process and the first month after closing, but usually not much after that. Their emotional connection is gone. This is a natural part of the seller’s journey. The more often you see it, the more you’ll know it’s coming when you enter into a new acquisition agreement.

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For more advice on the seller’s journey and mastering acquisition entrepreneurship, you can find Buy Then Build on Amazon.


Picture of Walker Deibel

Walker Deibel

Walker Deibel is an entrepreneur and advisor. He is the author of Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game and Creator of Acquisition Lab.

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