Sellers of businesses considering selling their companies or who receive an unsolicited offer even if their business is not actively for sale tend to “pretty up” the story about their business in the same way that homeowners do when selling their homes.

Sellers must convince potential buyers, but they must never hide their company’s flaws. During the buyer-seller interaction, trust must be built. If a seller note is involved, the seller wants assurances that the buyer is financially qualified, serious about business, and capable of running it successfully.

A buyer must determine whether or not the seller’s claims about the company’s finances, overall stability, and potential growth opportunities are realistic and verifiable before deciding whether or not to purchase the business.

No matter how minor one party considers them, disguising issues can land sellers in hot water, especially if they attempt to conceal the massive problems. You can be sure that a knowledgeable buyer will find the flaw, reducing the seller’s credibility. A buyer who doubts the seller’s honesty is unlikely to complete the transaction. Repackaging items in their original containers is like squeezing toothpaste.

To avoid sabotaging a transaction, both the buyer and the seller should be candid and open about potential risks and solutions rather than concealing them. Using this strategy alone can significantly improve your credibility in the eyes of a potential customer or client.

If you’re trying to sell your company, you and your representative should list all concerns. Consider this: What worries me the most at night? What dangers await? What past mistakes could haunt the company? What would they have done differently if they knew now? Respond to these inquiries with a “Problem/Solution” formatted list of possible solutions.

When sellers are open and honest about their business, customers are far more likely to purchase from them.

When a buyer learns of a seller’s failure to disclose information, every statement the seller makes to the buyer becomes suspect and subject to challenge. Surprises are always a deal-breaker. Although a surprise is an excellent addition to a birthday party, it has no place in the professional world.

 

Michael J Schwantes is President & CEO of Creative Business Services/CBS-Global.

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