Headline in what I call the personal interest column in the Wall Street Journal on February 8, 2022, “Realtors Embrace Brutal Honestly. ‘Smells Like a Farmtown.’” The article is about how some realtors are mentioning the downside of their communities whether it’s smell, weather, terrain, or something else.
Taking care of (potential) problems before they happen. After all, there are detriments to every house, neighborhood, and community.
In our world of buy-sell deals we see a wide range of business-for-sale descriptions, including:
- Those that state nothing more than opportunity, potential, and growth. My favorite was a business losing over $200,000 per year for at least the last three years and when justifying the price, the broker said, “potential.”
- Some that are very basic, just lay out the facts and history, with very little embellishment. As in, here are the numbers, so make a decision. An example of this was a one paragraph description of the business with the P&L from the preceding year. And somebody paid this person to sell their business.
- And then there are the memorandums with complete information. If there’s customer concentration, mention it. Same for restrictive license agreements, a key employee dependency, or upcoming capital expenditures. A memorandum on a deal I was involved with a couple years ago covered the following topics to show honesty and reality (there are no perfect businesses):
- Business weaknesses
- Impediments to growth
- Limitations on services
- Buyer concerns
All the above were pretty mild and when you fully disclose, the rest or what you state is taken more seriously. And this applies to everything in life. Sooner or later weaknesses are discovered.
“Where is the knowledge we have lost in information.” T.S. Eliot
