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Caveat Emptor – Let the “seller” beware
| Guest post by: Andrew Rogerson |
Article Overview: Selling any business is rarely an easy and straightforward process. There are many things to contend with such as employees, customers, landlords, lenders, suppliers and may be others such as a franchisor etc. However, there is also unknown an opportunist that may be interested in your business and it’s important you know about them. The Latin phrase, Caveat Emptor normally applies in the law that a buyer needs to be careful before they make a final purchase decision. The same applies in this case, Let the “Seller” beware before they accept an offer to sell their business.
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Free Download - How to sell a business By Andrew Rogerson |
Caveat Emptor – Let the “seller” beware
If you own a business and receive an unsolicited offer to buy your business please be careful. If your business is currently for sale be even more cautious. There are con artists that have developed a clever process of taking your business from you and leaving you not only with absolutely nothing, but totally destroying your business and leaving you in debt.
Here's a basic breakdown of their process.
Their easiest target is to contact the owners of businesses for sale, usually via listings on the internet and identify themselves as acting for a private party or a small investment group. They are looking for businesses generally that have at least a $1,000,000 selling price.
If the business is being listed for sale by a business broker or intermediary, they will try to build a strong relationship with the seller. If they feel the broker or intermediary is an impediment to what they are doing, they then try to get the broker or intermediary out of the way by saying direct to the seller that the broker or intermediary is a hurdle to closing a deal.
Once they have a good relationship with the seller, they then make a strong offer with the condition they finance the deal over a short buy out period (say 6 to 10 months.) The offer will include a small down payment, say 10% down AND as a stock sale (not an asset sale.) Under this scenario, the seller holds all the stock of the corporation as collateral, and of course, the sale includes the cash, Accounts Receivable and other items per the Balance Sheet.
Once they pay the seller the 10% deposit, they then require signature rights to the business bank accounts, credit cards and other assets while the seller "trains" them in the day to day operation of the business for the agreed two to four weeks training period.
Once the training is complete, they then clean out the cash, run up the credit cards, factor the Accounts Receivable, may sell off some or get loans on the fixed assets (vehicles, etc.) and do not pay any payable/liabilities. They even sometimes fire employees, usually never paying any of the businesses (or employee's) payroll taxes or other taxes. Then, they disappear in a month or so having cleaned out the company by taking everything as cash.
Bottom line: These scams really do exist. It's another reason to make sure your business broker is part of a State Association such as the California Association of Business Brokers or association such as the International Business Brokers Association. If you are planning to sell your business in Sacramento, please give me a call so I can help you. If you are not in Sacramento and would like a referral to a business broker near your business you are also welcome to give me a call.
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Article Tags: Andrew Rogerson, business, Business broker Sacramento, business escrow, business for sale, business plan, due diligence, exit plan, franchise, franchise for sale, Murphy Business and Financial Sacramento, Sacramento business broker, Sacramento business ownership, sell a business, Sell a business, succession planning
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About the Author: Andrew Rogerson RSS for Andrew's articles - Visit Andrew's website Andrew Rogerson is a 5-time business owner that loves helping entrepreneurs sell or buy a business. Andrew currently holds the Certified Business Intermediary (CBI) designation from the International Business Brokers Association (IBBA), the highest designation awarded by the IBBA. Andrew has also earned the Certified Business Broker (CBB) designation from the California Association of Business Brokers (CABB.) He holds a Certified Machinery and Equipment designation (CMEA) from the NEBB Institute and is a Certified Senior Business Analyst (CSBA) with the Society of Business Analysts. Andrew is a member of the Sacramento Metro Chamber of Commerce and past Chair of the Sacramento Chapter of the California Association of Business Brokers. Andrew is also the author on a series of four books: Successfully Sell Your Business, Successfully Buy Your Business, Successfully Buy Your Franchise and Successfully Start Your Business. For more information go to http://www.businesstransactionbooks.com Click here to visit Andrew's website   Successfully buy a business |
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- [quote="litekepr":dwjxzl56]If the shipping takes longer - I'm find with that IF the seller made that clear on their sales page and IF they communicate about what's happening. Its the sellers who say they ship immediately and then send later with no communication that irritate me. I always pay immediately and expect quick turnaround. I ordered a PDA and no joking - it didn't arrive for 5 months and the seller never did communicate with me or respond to any messages. When it did finally get here, I looked at the ship date and once they finally shipped it out - I received it within a week.
Shri[/quote:dwjxzl56]
Hi Shri,
As an online seller, I'll always communicate the details (e.g. ship date, confirmation/tracking code, estimated time of arrival, etc.) and sometimes even the options (i.e. Canada Post vs UPS cost to ship) to the buyer.
But when your package didn't arrive for so long, why didn't you write to bug the seller?
Online selling tips for newbies
- If you want to sell something online and get paid through PayPal, what are you supposed to do? Do you ask the seller to pay your account by giving him/her your email address (that's registered with PayPal) or do you send him/her a bill via PayPal?
And once the seller has paid you, can he/she get a refund or cancel that transaction?
Thanks
How do you set a value on a business?
- Hello there!
I have a friend that's looking to sell their business. I would like to know how a business gets valued. Can someone help me here?
Here's some fairlyaccurate numbers:
Gross sales: $153,000 (3 year avg)
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I've heard that there's a ratio that can determine the value. Does anybody know what it is?
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Buyer has suggested deposit, then pmt plans. I'm under the impression that this is common practice in the sale of a business. If so, what's the best way to approach this proposition as a seller?
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Re: When do you process online orders?
- If the shipping takes longer - I'm find with that IF the seller made that clear on their sales page and IF they communicate about what's happening. Its the sellers who say they ship immediately and then send later with no communication that irritate me. I always pay immediately and expect quick turnaround. I ordered a PDA and no joking - it didn't arrive for 5 months and the seller never did communicate with me or respond to any messages. When it did finally get here, I looked at the ship date and once they finally shipped it out - I received it within a week.
Shri
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