Bought/Sold Business? Unreasonable Expectation?

Question

Hi there- not sure where this topic belongs - figured in this subforum may be best -- Please move if not.

So far I've purchased one business - our present Senior Living Business almost 3 years ago - so I'm not the most experienced but learned A LOT in the process.

I have been looking at other senior living businesses for sale and a broker that had kept my name sent me a deal. I signed the NDA and he sent me their listing detail which is about 10 pages long and didnt tell me much. I asked for figures - they sent me only figures current to May 2019. They are cash basis accounting and IMO in our business I can get a better idea on the health and profitability if I have Accrual basis figures by month or by year and I can average it out - the broker is acting like I'm asking to move the Earth over 6" and that without a submitted contract they're not wasting their time paying their accountant to give me those reports.

I didnt run into any of this when I bought our existing business.

Am I out of line without a submitted offer to ask for Accural accounting figures vs cash (as the broker told me they use Quickbooks and have clean books) -- If they truly do it would take less than 5 mins to give me what I want - it's just a few mouseclicks.

I shot him a snarky reply if they dont want to give it to me that's fine but based on what they presented showing the business makes little money on paper and cash basis figures I'd offer a quarter of what they are asking - said I'd be glad to make a fair offer with the appropriate information and left it at that.

Anyways I dont get people. Am I out of line - I dont have much experience buying/selling a business so maybe I'm asking unusual questions. Seems dumb to tie up my money in an offer without appropriate information.

Jeff S. · Answer

It sounds like this broker has you on the run, @Shane H. He clearly doesn’t understand your experience or your interest. I don’t believe you’re out of line, but there is no reason to spend a lot of time on you without a signed offer. You’re at an impasse. This broker won’t give you the time of day without an offer and you won’t make an offer without adequate information. Considering that most businesses provide inflated numbers up-front, it’s likely that this one is truly only worth one quarter of what they are asking, or less. You are not responsible for bad business practices or poorly kept books. And, don’t assume that everyone runs their business like you run yours. This could be an opportunity to purchase a diamond in the rough if you are willing and able to turn the business around. Don’t be snarky nor apologetic, but write an honest offer based on the information you received. Show your rationale and list the additional information you require, in detail. If they can provide verifiable evidence that the business earns more, and is therefore worth more, make it clear you would be happy to pay more. If not, be frank with the broker that if it’s really as bad as they’ve currently provided, all you could really do is take the business off the current owner’s hands for a nominal sum, assuming that’s something you want to pursue. Many tired business owners will welcome this. Give yourself more credit, Shane, and best of luck to you.

Greg Dickerson · Answer

I have bought and sold 13 different companies and you are not out of line. It is standard practice to request several years of tax returns and financials and any legitimate business broker would h an Bethany for you already. If you can’t get the info from them you can tel them you will request it directly from the owner and negotiate directly with the owner. The broker would still get their commission but you deal directly with the seller. If you can’t get the info then move in. There are plenty of great deals out there.

Ujwal Velagapudi · Answer

@Shane H. I agree with the others as well, you definitely were not out of line, and it is common to provide those details. I think it might be a lack of understanding how easy it is to press the mouse a few times like you said to generate the accrual basis report in Quickbooks. I always try to do as much "due diligence" up front when buying businesses, and if there is a broker like you're explaining where they won't share any additional data that is common (even after signing an NDA), then I'll just walk since I've wasted my time multiple times getting deeper into the process to only find out the information I had requested was not sufficient for my criteria (usually involves financials like in your case). Finding the issues up front will prevent you from wasting all that time later on. I feel your pain though, I think in businesses it is even more important to have a solid broker and there are very few of them around that can adequately assist a seller/buyer. But if you truly do like a business, I have shared proof of funds, shared my expertise within that industry, etc. that may be seen as more attractive for the seller/broker in providing more information up front and taking you seriously.

Shane H. · Answer

@Jeff S. @Greg Dickerson Thanks guys - no one to really bounce that question off of that I know personally. I'm not going to lose sleep over it - he sent me the deal so if he's not willing nor the seller willing to provide the info then that tells me they're hiding something or they're waiting for a sucker to come along. I was just curious with the flak I caught if I was not following the normal biz/buy/sell decorum so to speak. If it's still available in a year or more I'd circle back around. I kind of left it that if they can't provide the information I have no point in submitting an offer. I probably annoyed the guy which is fine - if he's catching attitude over a simple request then he's not doing his sellers any favors.