For every reason under the sun.
Here are just a few examples:
- The records don’t match the owner’s representation.
- A lease cannot be secured for the buyer.
- The buyer cannot get financing.
- The buyer and seller can’t stand each other.
- The buyer becomes sick.
- A single contract makes up 2/3 of the business, a risk the buyer is uncomfortable with.
- There are no contracts for the work.
- The parties cannot agree on the value of the inventory.
- There are liens on the inventory that the seller cannot get released.
- Another party has to release the sale and will not.
In short, most every reason under the sun and more.
These are some ways to avoid or resolve issues. Match to the numbers above.
- The broker can encourage and perhaps coach in advance of the sale. “Get tax reports in order prior to the listing.” “Have files put in order and neat.”
- Make certain to review the lease in advance for ability, discuss with the seller and have the seller take responsibility to secure the lease for the buyer. The seller is usually best able to do this.
- Review the buyer’s net worth, credit scores etc. prior to the purchase agreement. Recommend credit score clean up.
- Encourage both to focus on the issues, not personalities; if they are truly interested in selling/buying working to respect one another; have the broker serve as intermediary on all issues.
- Sickness is unavoidable but perhaps a deal can be mothballed until recovery…or not.
- Encourage seller to begin (at the time of listing) to work for further diversification.
- Encourage seller to develop appropriate contracts at the time of listing. Some work does not benefit from contracts. If the seller has been successful, the buyer needs to understand that they should be able to perform without contracts and making dramatic changes, at least initially, is likely a big mistake.
- Help the parties to agree early in due diligence how inventory should be assessed.
- The close can be a means for release, paying them off from proceeds. The seller may be able to negotiate a personal loan to pay the inventory in advance.
- It is important to understand before the listing that all parties with authority have agreed. There can be release built into the due diligence.