Losing a deal can be a gut-wrenching experience you’ll want to avoid at all costs.
Getting deep in the process only to have the deal fall through last minute is a huge waste of time, effort, and energy. The emotional swings can make it tough to get back on the horse.
In this episode, Ace and I want to give you a run through of the top 7 deal killers we’ve run across and share some of our personal experiences in losing deals on both the buy and sell side. We’ll look at some of the personality conflicts we’ve run up against, what happens when a change in earnings/traffic happens mid-closing, and some of the signs you might not be working with the best buyer/seller.
We’re hoping that sharing our experiences here will help you avoid losing your own deals at the last minute.
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Listen To The Full Interview:
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What You’ll Learn From This Episode:
- Too many unnecessary employees and loose relationships with contractors
- Personality conflicts
- Vendor or wholesaler requirements are too stringent
- A last minute decline in revenue or traffic
- Pending Legislation (or Litigation)
- Seller is CRITICAL to the business
- Seller had a litigious past
Featured On The Show:
Ryan Sorensen says
Hey Guys,
Thanks for another good show and for the mention. Justin, we’re definitely bros!
I wanted to add a couple reasons for sales falling through that I’ve seen over the years.
Cold feet. I’ve unfortunately seen deals fall through on both the buy and sell side due to last minute jitters. The best way to combat this is to thoroughly cover due diligence prior to signing any legally binding documents, set reasonable expectations on what both sides are committing to (the terms of the deal, what each side will do after the sale, etc.), and to keep the lines of communication open at every stage of the process so any concerns can be quickly and thoroughly addressed.
Due diligence issues in escrow. Some due diligence items can’t be covered until the transfer is done in escrow, as such some issues can come up when both sides are already committed. This would include vendor issues (as you covered), affiliate and 3rd party marketplaces not being fully transferrable or can’t get the same %s or pricing, or previously unmentioned expenses are discovered. While these issues can typically be avoided by good brokers who ask the right questions of the seller prior to listing, they do sometimes slip through the cracks and couldn’t have been discovered until the new owner takes over the biz.
Tax concerns. Every deal has either money going out or money coming in so there are tax implications. One seller I know of decided it wasn’t worth the cash infusion on a sale as he would have had to pay a good % of it on taxes, so he ended up backing out last minute. In the US there are companies who specialize in tax deferment on capital gains, so it would be worth always checking in with an accountant as you prep for a sale to finalize.
Looking forward to more episodes. Thanks guys!