Try before you buy?

searcher profile

March 25, 2025

by a searcher from Yeshiva University in Los Angeles, CA, USA

What are your thoughts about working in the business for a year or so before buying. I am working on a deal that has a lot of owner involvement and he would prefer training and seeing how things go for the first year before making a sale. Anyone here try that?

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commentor profile
Reply by a searcher
in Winston-Salem, NC, USA
For some deals it might be the only way to get what both the sellers and buyers want. I am looking at a manufacturing deal currently that is unfinanceable with SBA lending due to poor performance in the past 2 years. With my expertise in the specific industry I'm really confident I could turn it around.

The problem is that because it is losing money it is effectively only valued as the liquidation price of the assets (which is less money than the seller wants) and there is no way for a bank to finance this with enough working capital to actually run and grow the business (there are heavy inventory costs in this business).

My options are A) Raise a ton of money from investors to buy this (downside is give up equity and also there is some risk if I cannot turn it around) or B) Run the business for 1-3 years or until it is bank financeable and then complete an acquisition (eliminates the risk if the turnaround isn't successful, and gives the seller a better sell price).

Only way to do this is for an ironclad agreement and price agreed upon ahead of time, in writing, by contract.
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Reply by a searcher
from University of Delaware in Los Angeles, CA, USA
I tried to do this with a home services seller. His financials were commingled, he had no tracking of costs, cogs, and revenues by job, nor any way to verify marketing performance. I offered to work in the business for three months, taking over all day-to-day operations as a means of conducting due diligence and verifying transfer of value. This would give him value in terms of operational relief, and minimize any post close transition. I haven’t researched this yet, but from within the business, I was hoping that would also enable structuring the deal as a management buyout with additional funding options and possibly easier underwriting. Unfortunately, the seller declined.
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