Buyers Wants and Concerns
The following are wants and concerns of every buyer:
1. Furniture, Fixtures and Equipment – Buyers want
- A complete list of the furniture, fixtures and equipment.
- To be in good working order.
- To pass all inspections necessary to conduct the business.
- To know the fair market value.
2. Lease – Buyers want to read a complete and true copy and want to know:
- The monthly rent.
- If there are any triple net costs (insurance, property taxes, common area maintenance) and, if so, the amounts.
- About Association dues, if any.
- When the lease expires and what are the options and terms to renew.
- If there is any special provision, such as a demolition clause or repair obligation.
3. Proof of Sales, and Purchases – Buyers want to see:
- State Sales Tax Returns.
- The Profit and Loss Statements (past and current).
- Schedule C of the 1040 Tax Return or 1120 Tax Return.
- And understand what makes the business “tick”, i.e. how many transactions per day, breakdown of sales by category, Costs of Goods, etc.
- A breakdown of your purchases.
4. A Return on Investment – Buyers want a return of about 10% on their initial investment or down payment.
5. Living Wage – After they pay the debt service on the note (if any), they want to make a reasonable living wage, generally to continue their current standard of living.
6. Leverage – Buyers need sufficient working capital to be successful, therefore:
- In many cases the buyer will need to provide working capital.
- In some cases, working capital is included in the purchase price.
7. Training – Since most buyers are first-time buyers, they will require training.
- Typically there is a predetermined time that is included in the purchase price. Any additional time that is needed shall be negotiated between the buyer and seller.
8. The Reason You Want to Sell – Buyers:
- Need to be assured there is a logical reason for your selling.
- Are often fearful that you may be selling because there is an undisclosed fact about the business which will hurt (or potentially hurt)the business.
- Experience a heightened concern when you want all cash. When you are willing to carry a note on the business, they are reassured that you have an interest in their success.
9. What we call the KICKERS – (Most of these items can be addressed or overcome in negotiations. The important thing is for the VR Intermediary to know about seller up front so there aren’t any surprises to scare the buyer away). For Example:
- Are you in compliance with health codes, zoning, ordinances, etc?
- Do you have any equipment leases? If so, are they assumable?
- Do you have any secured obligations against the business (liens, loans, etc.) ? How can they be handled?
- Do you owe any state or federal taxes?
10. Prompt Response to Offers – Respond to offers immediately because:
- Buyers usually consider more than one business.
- The more time you allow the buyer to think about the decision, the more doubts he may have and the more opportunity others will have to advise him against buying.