Should You Allow the Buyer to “Test Drive” Your Business?

Often times buyers want to test drive a business before they buy it

Should You Allow the Buyer to “Test Drive” Your Business?

Absolutely Not! Allowing a buyer to take over your business before closing is never a good idea. If you were selling your house, would you allow the buyer to move in early, prior to closing, to make sure they like what they are buying?

I’ve had this request from buyers more than once, and their reasoning often initially makes sense. They want to make sure they hit the ground running when they take over. The business might be so busy that an extra worker (the buyer), possibly without pay, would be welcomed. There may be a situation where the owner is burned out and would welcome an early start by the buyer. Or possibly the owner has health issues and physically can’t be on-site. In this situation, you might need to bring the buyer on early with multiple protections for the seller. However, here are reasons why you should avoid letting the buyer “test drive” your business before closing:

There is a Clash in Leadership

Business owners have their own style. The seller, who still owns the business, clings to what they feel has been a successful formula. The buyer, who is buying because they believe they can take the business to the next level, wants to do away with business practices they find outdated. This situation can lead to unnecessary disagreements that could derail the deal.

The Buyer Becomes Overwhelmed

Stepping into business ownership takes time, dedication, passion, and proper training. Fully understanding how to operate a business can take six to eight months. When a buyer steps into a 2-3 week “test drive” situation, they may become overwhelmed and realize this just wasn’t what they had envisioned. Allowing the buyer to “try out” ownership makes it too easy for them to walk away from the deal if they were naïve or don’t like what they see. As Christina Lazuric puts it, “If you drop someone in a pool, the edge is so close that it’s easy to give up when it’s hard, but if you drop them in an ocean 100 yards offshore and point to the beach, they’ll figure it out.”

Buyer’s Remorse Kicks In

Business buyers usually experience some level of buyer’s remorse, which is the feeling of regret or anxiety after making a purchase. This can be temporary and is usually a result of feeling they overpaid or bought a business that could easily lose market share. Business ownership is difficult and comes with multiple challenges. If the buyer experiences buyer’s remorse during a business “test drive,” they may decide to “walk.”

Employee Confidentiality is Exposed

I advise business owners to wait until all documents have been signed and the money is in the bank before telling their employees that the business is for sale. This can be difficult, especially if you have removed yourself from the business and have a solid team of key employees running it. In this case, the buyer will likely insist on meeting these key players.

When allowing the buyer to “test drive” your business, your employees will most likely discover you’ve sold the business, either by putting two and two together or because you and the buyer have decided to prematurely make the announcement. Once employees know in advance that the business is for sale, there is the risk that customers and vendors will find out, putting these crucial relationships in jeopardy. There is also a chance your team may start looking for work elsewhere. Any disruption with customers, vendors, and employees may give the buyer reason to cancel the transaction.

They say a deal dies three times before it closes. There are many ups and downs during the process. There are multiple reasons a deal can go off track. Yet if the seller and buyer trust each other, both sides can work through the turbulence of selling and buying a business. The key is to eliminate as many potential disruptions as possible. Allowing a buyer to “test drive” a business is a major disturbance that should never be permitted.