In the business brokerage market, there is a hushed phrase the wise old brokers bandy about behind closed doors: “Buyers Are Liars”. Like many euphemisms, there is a ring of truth to this saying. So how and why does this perception exist? At its core, it comes from education or the lack thereof. The lexicon that most buyers use when looking at the business buying market is their experience in Real Estate. Whether it be commercial or residential the comparison to the business sales or mergers and acquisitions market is problematic.
First here in Florida over 95% of the business transactions do not involve the sale of real property and a large component does not even involve the transfer of a lease. Secondarily, Buyers have to keep in mind that regardless of market conditions, unlike real estate where the market switches between a “buyer’s” or “seller’s” market, in the business sale sector, it is always a seller’s market. There are thousands of people looking and the majority (less than 10%) will ever pull the trigger and buy a business. Subsequently, business brokers know that over ninety percent of the buyer inquiries they receive will not result in a successful transaction. 90%….90% of communication contact do not result in a sale. Now some will say it is the job of the broker to educate and sell the buyer to improve that number because obviously, the contact wanted to buy. The reality is that brokers are paid by success, the business reality is to pour money (effort and time) at improving the number based on what may occur is bad business given the reality of the market
Additionally, there are a lot of crappy businesses for sale but the good ones always sell quickly and at good price and terms. So principle to buyer mentality is understanding it is never a buyers market….since the availability of well priced businesses with good records is at a premium. Do not as a buyer think you have leverage you do not have. Reality in the Market is elemental to success