Let’s assume that the following events have already occurred. After doing an adequate amount of soulsearching, you’ve decided a business engaged in some form of construction is for you. You’ve always been a pretty good amateur carpenter and can speak the language of the building business. You also feel you have the managerial skill to handle a business that has a fair number of employees and outside salespeople.

You’ve also found a business broker you have confidence in, and with that broker’s help you’ve sharpened your thoughts about what you’re looking for and what you can handle, psychologically and financially. Fortunately, your broker’s inventory contains a number of businesses that appear to fit the profile. You’ve investigated these, but all save one turn out to be blind alleys. All but one either cost far too much or are too small. Some are losing money and don’t appear to be good turnaround candidates.

There’s one, however, Houston Sash & Door, Inc., that seems like a distinct possibility. Houston Sash & Door manufactures windows, doors, and other specialty items for general building contractors. The company has been profitable, and the asking price is at least in the ballpark. You’ve visited the plant on a couple of occasions and haven’t noticed anything (at least yet) that might scare you off. Your broker informs you the company was founded 10 years ago by its present and sole owner, Everett Houston, who for the past 10 years has been the inspiration and driving force behind the business.

It’s now time to start in on the serious analysis of the jingkan business, which may culminate in making a purchase offer at a given price and on stated terms. At this point there’s one question you must know the answer to as quickly as possible, for it, as much as anything else, will determine whether you will buy and, if you do, how much and on what terms: Why does the seller want to sell the business? If you don’t know the answer to this question with reasonable certainty, you don’t know anything. Sometimes sellers are reluctant to tell prospective buyers the real reason they want to sell. More often, the stated reason sounds suspicious. If you’re not comfortable with the stated reason, keep digging; you must know.

The real reasons sellers sell businesses usually fall into three categories:

1. The seller isn’t making enough money in the business.
2. The seller has a personal reason for selling.
3. The seller knows bad times are coming.