Now this is the big step everyone is dancing around. The big decision!
In my experience, the decision to buy a scuba diving business happens, not over a conference table or in an office, or even in the dive centre itself. It’s an emotional decision done over a cup of coffee in the morning at home, or maybe on the porch of the hotel room at night actually in the destination.
You have all the MoS, and now a lot more info by spending a few days with the Owners and looking at the business. Probably been for a few dives on the dive boat, seen the staff doing what they do. Maybe sat round the pool and watched one of the OWSI’s do a DSD with some students.
You sit and try to analytically look at the MoS, and try to get a feel for the limited financial info you have been given. But in the end, you just decide:
“YES. This is the life i want to lead at this stage of my life, so lets work out how I can get it…”
Right, you feel a LOT better already! You feel like you’ve MADE the decision and now you’ve just got to get the paperwork and that out the way. LOL if it was only that easy.
Piece of advice here, keep your business head on for a few more days… You will be starting to feel VERY near to the prize and the tropical lifestyle at this point. Don’t lose your head and go all ga-ga on me at this point. The proverbial honeymoon feeling of having made the big decision to DO IT here in the tropics! (but do feel free to have a few glasses of wine!)
How do you decide on The Offer?
Now you have to work out what Offer you are going to give. Not a simple task. Not just a good ratio or ROI worked out by an accountant in a wee grey office somewhere looking at a spreadsheet. You’ve not really got ALL the inside info yet either.
This is the business risk part that a lot of people are completely incredulous about, and many get stroppy.
“How do you expect me to make a real offer when i’ve not seen the real financials or books or the real asset register” goes the cry!”
There is also probably the Price Guide, or the Asking Price which the Seller has given you. I say probably, because some won’t, preferring to gauge the market price and leave it completely open.
The Offer you’re about to make is going to be based on all these factors and, lets get down to it, your assessment of what the Seller will accept.
Ah yes, that is the nature of buying business and the business risk involved. The bottom line of this is that the risk isn’t as big as most people think it is. Once you make an Offer base don the information given, you get to do what’s known as your “Due Diligence”.
Make the Offer
Offers are normally received in writing in the form of a letter of intent and include the following:
- Name of the buyer and the date
- Purchase Offer
- Time frame for the settlement
- Required owners assistance during the changeover, time and nature of their involvement (see this article)
- Competing trading restrictions for the owners (non competition clauses)
- Exclusion from purchase (things they don’t want, maybe one of the cars, maybe all the office eqt)
- Conditions the offer is subject to
If the Buyer doesn’t know how to do this, normally accountants and lawyers or business advisers can assist. Or if the Seller wants, this can be a “preferred info in an offer” sheet as a guidance.
If the offer is acceptable to the Seller then all is well. All shake hands and have a drink. However in reality, it seems that everyone wants to feel a bit “special” and wants to exercise their egos in this particular business (I am waiting for the day to be proved wrong and will have a great party with both Buyer and Seller and I’ll bloody pay, lol!)
At this point the buyer gets to do full and true due diligence. They get access to the World! (but we’ll cover that in another article)
If as we discussed above, the 2 parties decide to flex their egos (yes I want to say it as it is), and the seller makes an offer aimed to be ‘flexible’, the next step is negotiations.
In a way it is fortunate for all involved in buying and selling a scuba diving business, businesses by nature are very complex and flexible which creates room for negotiation.
The best way to do this is not to manipulate other parties or use tricks and techniques but to enter into a communicative and creative process.
We are all in the same very small niche business, so chances are the seller actually really understands the buyer’s situation. Probably better than the buyer in reality. Many of the buyers are first time scuba dive business owners (or to be more precise want-to-be-owners) whereas the current owner has been in scuba industry for years.
It stands to reason, and historically, that the Seller knows an awful lot more about the business than the Buyer. The advantage in this is definitely in the Sellers favour.
Present clearly your situation to the seller and reasons why this is your offer. Then work hard to attempt to create the deal and agreement which can satisfy both parties needs and circumstances.
Having your entry and exit point and knowing your limits will be of great assistance at this point. This will help you negotiate with certainty, control, confidence and without (too much) stress.
Accepting the buyers offer does not mean that the business is sold. The business should stay on the market and introductions and negotiations with other buyers should continue all the way until a contract of sale is entered into with one of the buyers.