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The Skillsets Of a Successful Buyer Of Online Businesses
By Quiet Light
There are fantastic buyers and there are terrible buyers. But what makes a successful buyer successful? What is it they have which enables them to close a deal without breaking a sweat?
At Quiet Light Brokerage, I am in a position to meet lots of different kinds of buyers. They all have varying degrees of success negotiating the best deal possible. I have frequently noticed that the really successful ones have much of the same attributes. Unfortunately it can’t be bottled up and sold, but I can tell you below what those skills are.
When you own an online business, having to process various streams of data is a requirement. But not everyone likes jumping into crunching numbers like a supercomputer.
Harvard Business Review recently released a study that shows most entrepreneurs actually lack analytical decision-making skills. This is not to say they are bad at analyzing data; instead they don’t place too much importance on it.
What IS important for a buyer is to be a strong strategist, instead of getting obsessed about statistics. Statistics guide the strategy, not the other way around.
Highly successful buyers have no problem performing a technical analysis of a target acquisition. But at the same time they don’t get overly absorbed in it. Those that do tend to have a harder time completing the deal.
If you’re a highly analytical person looking to buy an online business, you need to remember that there might be a tendency to get lost in the data. Successful buyers are able to use data within a strategy rather than to have the numbers become an end to themselves.
If you are not a highly analytical person, you should take the time to become familiar with how to perform the basics. Spend some time studying how Google Analytics works. Understand financial statements. Learn how to do very basic financial trend analysis.
You don’t need to become a statistical genius to effectively analyze a business. But you do need to know how to use the data to develop a strategy.
Unfortunately, most sellers of online businesses are woefully unprepared. This leads to many businesses being misrepresented, intentionally or otherwise.
While working with a broker can certainly help alleviate some of these problems, it won’t solve every problem you’ll run into. As a buyer you have to understand that not every transaction will be smooth, and you may have to deal with unreasonable requests from the seller.
Extremely successful buyers tend to be very patient buyers. It’s perfectly normal for your seller to panic and worry about the success of the transaction, as the sale date nears. Selling an online business, or any business for that matter, is a very stressful process, especially for those who have never been through the process before. This can cause your seller to act in a seemingly irrational way.
In addition to having to deal with inexperienced sellers and brokers who may not be representing a business properly, trying to find a business that matches your criteria is a very long and arduous process. Some buyers look for months before they find the proper deal. It can be tempting for a buyer to make an offer on a business that doesn’t meet the criteria, because they’ve been looking for such a long time. This prompts them to jump on any deal that looks even remotely appealing.
Unsuccessful buyers give in to the urge of doing a deal just to get a deal completed rather than waiting for the best opportunity. As a result, their time and resources get wrapped up with a business that doesn’t produce as strong of returns as the business they may have been waiting for.
Strong Personal Skills
Generally speaking, sellers tend to be somewhat skeptical that buyers will actually come through after making an offer. This means successful buyers tend to have very strong personal skills. They understand that closing a deal is more than a transaction. It’s a negotiation with the person – a human – on the other side of the table.
It helps to know what motivates sellers in a transaction. If you know this, you can modify your approach accordingly. There tends to be four things which motivates sellers the most:
The most obvious motivating factor for sellers is the price you offer for their business. Of course, as a buyer, you don’t want to only offer a huge price in order to close the deal. You obviously want to get a good deal for yourself. But understand that if you are overly aggressive on price, your seller is going to resist the transaction.
The goal of any good buyer is to create a deal in which both the buyer and the seller achieve a mutually satisfactory price.
It can be difficult for a seller to determine whether or not an offer is good or not. Therefore, sellers are more receptive to simple offers instead of highly complex ones. With so many different aspects of a deal to remember, keeping your offers as simple as possible will be more appealing.
Most of the people we negotiate with are nothing more than voices on the phone. So you need to work harder to build trust and goodwill with the seller. They need to see that you are honest and trustworthy.
This means you should take the opportunity to volunteer unflattering information, which will build honesty. If you are able to visit the seller in person, even better.
Progressing At a Brisk Pace
There is nothing more frustrating to a seller than to have the closing date continually pushed back. In addition, continually dealing with repeat due diligence requests can be extremely frustrating for sellers.
The lesson here is you should work to get as many of your due diligence requests done at the very beginning. Of course, there will always be additional requests needed, but you should try to reduce these as much as possible.
Buying a website is a process that involves many ebbs and flows. At times, information will flow easily, while at other times a seller may resist offering any information. In some areas, it may be easier to negotiate with the seller, while in other areas, the seller may be resistant to any negotiation.
Good buyers are highly goal-oriented. They do not get caught up in the back and forth of negotiating for the sake of negotiating. They do not desire winning for the sake of winning.
What does this mean for you? Make sure you know what your goals for an acquisition actually are. Some buyers find it helpful to write them down. Then, as you get into the difficult portions of the negotiations, keep those primary goals in mind.
Wrapping Up: The Unique Mix of Skills
Obviously there’s no one single set of skills or mix of skillsets that make a great buyer. However, there are certain common skillsets found among the most successful buyers. Skillsets which will give you an advantage over other buyers and help you complete a good, successful transaction.