What Could Go Wrong if You Let a Buyer Into Your Business Before the Deal is Closed

Lots! A lot can go wrong and has gone wrong for many sellers. Selling a business is a monumental decision, and the process can be complex. During the negotiation and due diligence stages, both the seller and the buyer are working towards a shared goal—finalizing a deal that benefits both parties. However, there’s one critical mistake that many sellers make: letting a buyer take possession or gain access to the business before the deal is officially closed. While it may seem like a good idea to allow the buyer to get acquainted with your team and your business, there are numerous risks involved. Here’s why you should SAY NO to granting access to your business until after the sale is finalized.

Your Buyer Could Walk Away With Little Consequence And Leave You With A Mess.

Of course a buyer can walk away at any time without having access to your business; however, once they begin to engage with your employees, customers and suppliers there are likely to be unintended consequences. Exposure to your business operations prior to the sale being finalized can lead to issues such as:

Employee Confusion or Uncertainty:

• A buyer could have a negative experience with an employee that causes them to doubt their decision to purchase your business.
• Employees may decide they don’t like the buyer and quit before the sale is concluded, causing the buyer to renegotiate deal terms or back away from purchasing.

Customer Confusion:

• Customers might have concerns about what changes will be taking place with pricing, products, services, or even the brand itself, leading them to question the future of the business.
• Once the buyer has access to your business, they could start making changes that affect your customers, or talking about the changes they want to make, making it harder to reverse their involvement if the deal falls through.

Disrupted Supplier Relationships:

• If the buyer contacts suppliers or tries to renegotiate terms prematurely, it could strain relationships and disrupt the supply chain.
• Once suppliers know you are selling, and they meet the buyer it’s likely they will be telling their other customers (your likely competitors) about the sale. When this is done prematurely your competitors may attempt to acquire some of your key customers, which if they succeed could cause your buyer to walk away.

A Key Risk To Early Access is Loss of Leverage in Negotiations

Once the buyer has access to the business, they may begin to feel more confident in their position, which can weaken your leverage in negotiations. If they start to see the day-to-day workings of the business, they might start requesting changes to the terms of the deal, renegotiating price, or demanding more favorable conditions.

Additionally, once possession is transferred, the buyer might feel more entitled to make demands or ask for post-sale guarantees, even though the terms of the deal haven’t been fully settled. By keeping control until the sale is complete, you preserve your position in the negotiations and prevent the buyer from having undue influence over the terms of the transaction.

The Best Strategy is to Delay Possession Until the Deal is Closed

Letting a buyer take possession of your business before the deal is finalized can create a host of risks and complications. From legal issues and operational disruptions to potential damage to the business’s value and financial uncertainty, the consequences of an early handover can be severe.

To protect your interests and ensure the deal goes smoothly, it’s crucial to delay possession until all conditions are met, the paperwork is signed, and the financial terms are fulfilled. By doing so, you can minimize risks, protect the value of your business, and ensure that the transition is successful for both you and the buyer.

Remember, the sale of your business is a big step. Taking the time to close the deal properly, without rushing into possession, will help safeguard the business’s future and your own peace of mind.