Write out your terms in a negotiation. You can take your time and understand what you want. When you’re ready, you can send it to the other party.
I wrote the following message in Word to the business broker for an ice cream and candy shop in Jackson, California. My mother and I explored buying that business in June 2021.
I wrote the message in Word because I felt it was too long for an e-mail. For this post, I made a few changes:
- I removed some of the text that I don’t need.
- The text below has been edited for readability.
- I changed names to protect the innocent as well as the guilty.
* * *
Bob, I hope this message will help explain how my mother and I are approaching the potential purchase of Train Town Candies,
I’m 51 years old and I was diagnosed with migraines in 2005. My mother is 80 years old. She helped run the Court Street Inn bed and breakfast in Jackson with my father after they purchased it in 1996.
Is It the Right Fit?
I told my mother about the sign in the window of Train Town Candies as I was walking along Main Street. My mother immediately told me that it would be perfect for her. She loves the customer service aspect she enjoyed when she ran the Inn. I decided to visit the store on June 21 and then I set up our in-store meeting on June 23.
We like the store. We think the store has a lot of potential. If we can get the operations and the offerings right in the Jackson store, we could expand to more locations.
We both have a lot of ideas for growing the current store. We don’t know how feasible any of them are until we have a clear understanding of how the business operates now.
What I Like
Here’s what I like about the business:
- The store pays John and Helen a salary and pays two employees well.
- John and Helen have two employees in this economy, which says you have store procedures and good employees.
- You already have relationships with suppliers and products.
- It’s in a good location where people regularly travel and stop.
- The store has the best selection of items between Placerville and Sonora.
- The business is well known, at least 20 years old, and constantly patronized.
What I Don’t Like
Here’s what I don’t like about the business:
- I suspect John and Helen run the store much as they have for 20 years.
- The business has no customer analytics, and it seems there are too many products in several categories, such as puzzles.
- There is no modern inventory tracking system.
- There don’t seem to be any security measures in the store.
- Online marketing has been neglected. The most recent posts came in 2017.
- The store offers no shipping or delivery options.
- The back of the store, including the kitchen area and the back rooms, is undersized.
I talked with my mother, and I have some conclusions about moving forward:
- We must know exactly how the business works and what improvements the store needs. Then we can apply for an SBA woman-owned business loan to finance the purchase.
- We need a clear understanding of every aspect of the business so we can plan to grow the business starting sometime in 2022. I expect we will spend the rest of 2021 learning the ropes and getting through the holiday season.
- My parents purchased the Court Street Inn unaware of needed repairs and other costs because the previous owners didn’t tell them. Once they owned the Inn, they discovered expenses they didn’t plan for. With regards to our interest in the ice cream and candy store, my mother told me yesterday that receiving so few answers to my questions “is exactly what happened with the Inn when we bought it!” She will not repeat the experience.
- I learned the value of due diligence and having the right agreements in place as recently as last year when a subcontractor damaged my business in several ways. I will not make that same mistake again.
- We have never managed employees in our businesses before, so we need to learn about payroll and other government requirements.
- Given the five previous points, we will order a business appraisal and have our CPA examine the financial records of the business. If the appraised value is lower than the $285,000 purchase price, we’ll ask what justifies the difference before deciding whether to offer a purchase price in line with the appraised value.
- I need to know exactly what I’m getting into. My mother wants Train Town Candies not only to be a great experience now but also to support her in the future.
We Are Serious
In sum, we can’t make a decision until we get all the information we need. If you find buyers in love with running a candy and ice cream shop, we’re all for them buying the business.
We are genuinely interested, but we’re experienced, and so we need more than what John and Helen appear willing to provide to us.
If John and Helen change their minds either now or later about more detailed disclosures, we’ll still be here and ready to talk. Until then, I wish you good luck in your search for new owners.
* * *
The broker thanked me for writing this, but I never knew if he read it. He responded by repeating that we should just trust him. Part of that spiel was telling me I didn’t need a business appraisal. That was not a big red flag, but a red beach towel the broker threw on top of my head.
I still said no, and the broker responded that he was baffled that he hadn’t earned my trust. I told him that I thought we would be screwed if we did the deal. I’m usually not so blunt, but the broker had no clue. After I told him that, he stopped talking to us.
This is disappointing, but I’m glad we’re waiting. This example shows that when you write out your terms, you learn if an opportunity is real.
Eric Butow is the owner of Butow Communications Group (BCG). Eric can help you tailor your company’s digital marketing. Set up a meeting with BCG!