Preparing for the First Buyer-Seller Meeting

Part Of The IBBA’s Best Practices Series

GREAT JOB! You’ve listed a profitable business; you’ve advertised the company and are now receiving some quality inquiries from potential Buyers. Successful Business Brokers understand the critical importance of the first meeting between a Buyer and a Seller and that one of the most important functions a listing Broker can perform is to properly prepare his or her Seller for this meeting.

With the assumption that the Buyer prospect has signed an NDA and has received a basic write-up on your listing, an appropriate next step will likely be a face to face Buyer-Seller meeting or, possibly an introductory conference call with the Buyer, Seller and the Broker(s) involved. Planning for this meeting with your Seller can assure a successful “first date” leading to sustained interest from the Buyer and deal progression. So how do you take control of this important step in the sale of the business?

Most first time business Sellers will be nervous, excited and stressed in thinking about and preparing for their first showing and I remind my Sellers that most serious Buyers will be feeling the same emotions. I then offer my guidance by taking control of the general structure of the meeting and suggest what should and should not be discussed in that meeting. In my practice, I generally advise:

1. The meeting should take place at the place of business before or after business hours and last from 60 to 90 minutes. If impractical to meet at the business, I select a neutral location such as a hotel lobby versus a noisy, busy and hard to find a seat coffee shop.

2. If your “Seller” is multiple partners or a husband and wife, I often advise-but never insist, that just one partner or spouse attend the initial meeting with the Buyer. Why? So often partners and spouses attending a Buyer meeting tend to “talk over” each other while competing for face time with the Buyer and in doing so, tend to correct each other or, worse, contradict one another.

3. I advise my Seller the meeting “belongs” to the Buyer. It is the Buyer’s opportunity to learn more about the business and the personality of the owner(s) while determining if there is a professional and personal connection between the Buyer and the company. While it’s appropriate to start the meeting with the Buyer offering some personal and professional background info on himself and why he has some interest in the Seller’s business, this should be addressed only briefly and at the very start of the meeting. The meeting then belongs to the Buyer and it is the Buyer that should be leading the discussion.

4. A first showing is not a Buyer training session. Many Sellers tend to want to explain in detail the exact workings of every aspect of their business and sometimes, out of shear nervousness, over explain their business. After providing a brief history of the business, a Seller should be guided to start by explaining his business in broad generalities…. “This is what we do, this is what we make, this is the service we provide and here is the broad process by which we operate our business”. Over the course of the meeting, and, based on the Buyer’s focus, the Seller can then begin to drill down and address directed questions about specific areas of operation i.e. employees, customers, equipment, marketing, etc. Let the Buyer control his own line of questioning, not the Seller.

So often, what stops a Buyer from moving forward are not the specifics of the business itself but the credibility of the Seller and yes, the Seller’s Broker. Credibility is undermined when inconsistencies in the details of the business are recognized by the Buyer. It is imperative that the Broker and the Seller “get their story” straight and provide consistent and truthful responses when asked some of the most common Buyer questions which include:

1. Why is the Seller selling?

2. How many hours a week does the owner works?

3. When does the lease end and what options are available?

4. Why the decline in sales this year?

5. How long will the Seller train and transition the business after closing?

6. Do you have any customer concentration issues?

In preparing my Seller for a first Buyer meeting I council my client that no deal negotiations should take place during the meeting. In addition, I exert a certain level of control over the meeting by advising my Seller’s to:

1. Turnoff or silence his cell phones during the meeting.

2. Dress appropriately for the meeting.

3. Not to exchange contact information with the Buyer at the end of the meeting (all communications between the parties should be directed through the Broker(s). In the case of the Buyer being represented by his own Broker, I will politely refuse offering my business card to the Buyer while instead commenting that he can communicate with me through his agent.

4. To bring a sample product to the meeting or something tangible that the Buyer can touch or possibly take home. This could be a company brochure, a menu or even a small widget if the company makes or distributes a product. Ensuring a comfortable first meeting should involve some forethought and planning on the Brokers part

Experienced listing Brokers should:

1. Reconfirm the time and place of the meeting with all parties 24 hours in advance.

2. Show up at the meeting location at least 15 minutes early to know where the sit-down part of the meeting will take place and to ensure enough seating for all attending.

3. Have copies of the listing sheet or offering memorandum that was provided to the Buyer in advance of the meeting for himself and Buyer/Seller if needed.

I prepare all my Seller’s by telling them to expect to answer in a clear and concise manner the three most common questions all good Buyer prospects will likely ask during the first meeting:

1. What are the biggest challenges facing you as the owner of your business (the “what keeps you up at night” question)?

2. What is the upside in your business (the “if giving unlimited time and money, what direction would you take to grow your business” question)?

3. Why are you selling? (the “if things are so great in your business, why are you gettin out” question)?

Experienced Business Brokers understand the importance of the first Buyer-Seller meeting as just one of the many steps towards advancing a transaction to contract, due diligence and closing. The goal of the first meeting is to uncover the synergies between the Buyer and Seller and to demystify the operation of the business for the Buyer so he can better understand the operation and picture himself as the future owner of the company. The best Business Brokers I know learn how to control this important meeting by setting proper expectations and guidelines for all parties to follow while, most critically, not getting in the way of the direct communication between the Buyer and Seller. Your Seller has hired you to provide your advice and experience in deal making; Your ability to plan and prepare your Seller ahead of his first showing will ultimately determine how well this meeting will go and, possibly, whether your Buyer remains interested in moving forward.

SUCCESSFUL BUSINESS BROKERS UNDERSTAND THE CRITICAL IMPORTANCE OF THE FIRST MEETING BETWEEN A BUYER AND A SELLER AND THAT ONE OF THE MOST IMPORTANT FUNCTIONS A LISTING BROKER CAN PERFORM IS TO PROPERLY PREPARE HIS OR HER SELLER FOR THIS MEETING.

RANDY J. BRING P.A., CM&AP, CBI