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"People try to buy software businesses with “no money down.” (“Will you loan me the entire purchase price of the business? I’ll pay you back over the next 3 yea

by pitt1980 11y ago

"People try to buy software businesses with “no money down.” (“Will you loan me the entire purchase price of the business? I’ll pay you back over the next 3 years. Promise!”)" ---------------- While I see why you would have run away from that particular structure, I'm curious as to how flexible you might have been from a straight lump sum structure If I was buy a business like this, willing to accept $X as money down, some % percentage of revenue for Y months, until you were paid Z amount, with some contingencies built in would look pretty attractive a sellers willingness to agree to terms like that would send a pretty strong signal that they weren't selling a lemon as a buyer, I'd be willing to commit to a Z price significantly higher than what I'd be willing to commit as a lump sum up front if the seller believed in the business, (and I guess were able to substantiate that I had enough ability no to drive the business into the ground) it seems like such a structure would net the seller more as well ---------------------- I'd love to hear your thoughts about how receptive you might have been to an offer like that

ufmace 11y ago
I would expect that it isn't so much about the direct financial tradeoffs so much as the question of - will you actually continue to pay on the loan agreement, and what are my realistic options if you decide not to? The first would require quite a lot of expensive, invasive due diligence on your ability to pay that people selling software businesses don't care to perform or pay somebody else to perform. The second is likely to be lousy. Options are likely to be to file a lawsuit, which is expensive, and try to collect if you win, which may or may not be possible, and is almost certainly very time-consuming. If you're selling a software business, you're mostly likely doing it because you don't want to bother with it anymore. You are very unlikely to suddenly decide you want to start up what is effectively a bank for one guy. I'd tell anyone who says they can't afford a lump sum to try to get a loan from an actual bank, because I have no interest in pretending to be one.

ufmace 11y ago

I would expect that it isn't so much about the direct financial tradeoffs so much as the question of - will you actually continue to pay on the loan agreement, and what are my realistic options if you decide not to? The first would require quite a lot of expensive, invasive due diligence on your ability to pay that people selling software businesses don't care to perform or pay somebody else to perform. The second is likely to be lousy. Options are likely to be to file a lawsuit, which is expensive, and try to collect if you win, which may or may not be possible, and is almost certainly very time-consuming. If you're selling a software business, you're mostly likely doing it because you don't want to bother with it anymore. You are very unlikely to suddenly decide you want to start up what is effectively a bank for one guy. I'd tell anyone who says they can't afford a lump sum to try to get a loan from an actual bank, because I have no interest in pretending to be one.