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Sell Your Business – Beware Of The Tire Kicker
We are often contacted by an employer after being contacted by the buyer. He wants that the information will form on the merger and acquisition process, we are happy to provide. He wants to wait, however, to engage our firm to sell his company "until this situation with the buyer is passed."
This is the beginning of the spiral of death. Do not want to sound too dramatic, but this rarely has a happy ending. These buyers are supposed to drain your time, resources, focus on the operation of your business and your business performance. They want to buy your business as the only bidder and get a great discount. Your tires will start, kick the tires, and kick the tires a little more.
If you finally get an offer after months of this drain of resources, which, to the surprise and chagrin of his owner, is unfortunately the expectations. A second potential outcome is that when the offer comes, the owner does not know if it's a good or bad offer. Finally, once the buyer has tied up the owner with the letter of intent, then proceeds attacking transaction value in every step of due diligence. He is the only suitor for what is nothing to stop the bad behavior.
This is so expensive for the owner of the business. Many owners of repeating this process several times before they acknowledge the damage being done to your business. When they do finally hire a company merger and acquisition or a business broker, the firm value has eroded substantially.
Although we have seen this situation develop from from a distance many times, we have been frustrated by our lack of success in changing the incurable optimism of the owner of this buyer. Since the agreement that children who are, we had to reach a creative solution and agree a structure to move the owner of the company towards a better outcome. If we feel so strongly that this buyer will be the real buyer in effect, must be willing to "establish" that the buyer in the form of a success fee discount.
God, That's it! If an owner has found a buyer, we can incorporate a sliding scale discount on the success fee over time if the buyer found purchaser becomes real. If the buyer becomes real very quickly the discount is great. If the deal is closed after five months of our work in M & A supply has fallen to zero, because we have thrown in the mix with several other qualified buyers and their supply has benefited more than 25% or more.
The benefits for the owner of the business of this approach are significant. First, if rare appearance of a legitimate buyer with a legitimate offer, the owner does not pay a great success fee for a small amount of work. Second, the owner can turn the burden of the process to the company A & M, releasing to run their business successfully during the process. Then stop the endless drain resources, kicking tires that erodes the value of the business. Finally, to change this from an auction of a tender to a truly competitive situation involving the universe of qualified buyers, the owner will no doubt that he got the best the market had to offer to your business.
About the Author
Dave Kauppi is the editor of The Exit Strategist Newsletter, a Merger and Acquisition Advisor and Managing Partner of MidMarket Capital, providing business broker services to owners of middle market companies. The firm counsels clients in the areas of M&A, valuations, “Smart Equity Capital Raises”, sales and acquisitions. Visit our Web site to review our lists of buyers and sellers.
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