Knowing when to walk from a Website purchase or sale

Know when to walk away from a transaction

Sometimes during a negotiation between a buyer and seller, there are definitive signs that start rearing up that lead to what is known as “deal fatigue”. This can happen as early as the LOI (letter of intent) stage – which is where an initial written offer is submitted and is negotiated, accepted or rejected. It can also happen well into the due diligence phase.

In the case of the seller, it may start becoming clear that, although they may have been agreeable to a deal initially, the buyer’s behavior and manner during the due diligence period may cause concerns about the future dealings with the buyer after closing. These can be anxiety about the buyer competence to manage the business (the seller’s “baby”) and the amount of support and maintenance that will be needed to transition the business. It can also be an attitude of nickel and diming and trying to chisel away at the agreed upon price and terms unreasonably. It also can be awareness that the buyer has unrealistic expectations or limitations they want to incorporate in the final purchase agreement that creates unnecessary risk and responsibilities on the seller that are beyond their control – such as guaranteeing specific SEO ranking, traffic and sales. The business history and fundamentals should be reason and motivation enough to make a purchase decision – which inevitably contains some risk as there are certainly no guarantees in business. Buyers need to assess the risk reward factors of a business for sale while concurrently evaluating their own skill set they bring to the new venture to determine the probability of succeeding or meeting their goals and aspirations.

Many times, these early warning signs should be weighed and a decision to walk from a deal and trust that a more harmonious deal will follow. This is much easier when the seller is not under pressure to sell or in a rush to sell. They can afford to be patient and wait for the right buyer and deal. The right deal usually means it is a smooth and fluid process where both parties are respectful and even.

On the buyer side, when a deal is agreed upon initially and they enter due diligence, red flags can start appearing in the form of incomplete data, inability to corroborate data or financial numbers, unorganized or incomplete presentation of materials to verify the business history, and erratic or highly emotional responses from the seller. If a seller is too pushy with closing in an unrealistic time frame – like 1 or 2 weeks instead of allowing a more normal due diligence and closing period of 3-4 weeks, this may be an indication of future problems. It is important that a buyer is kept current on financials of the business and that they know the seller is focused on the business health during the process. Any signs of impatience, or excuses for abnormal discrepancies in the numbers or current sales may be a sign the business is being dumped. If too many red flags show up, a buyer should really consider moving on to find an internet business for sale where these are not present.

Business transactions are primarily about dealing with people and relationships. Buyers and sellers typically will share at least 60 -90 days in a support and training period and so building a good relationship from the start – during the LOI and due diligence phase – are good indications of how the transition of the business phase will go. Both website buyers and sellers should be choosey when consummating a deal. The easiest and smoothest internet business for sale transactions are usually the most successful for both parties. If it is not win win across the board and clean and clear it is probably a good idea to move on and wait patiently for the ideal.

David Fairley is President and Founder of Website Properties.com. Having started Hamocks.com, Strollers.com and Drums.com as an early e-commerce entrepreneur, David's 25+ years of experience in the internet and Website Brokerage industry gives him a unique and experienced outlook on all things internet.