When selling your business, you don’t want just any buyer, you want the best buyer. With the market we’re now experiencing, many sellers are getting multiple offers, but the buyers they choose aren’t always the ones offering the most money.
Would you consider a lower price for a buyer that fits the company’s culture? Would you consider an offer that’s a million dollars lower if it meant the difference between years of seller financing and cash at close?
It’s common for deal structures to include a variety of options which must be carefully considered and evaluated, long before you get to the negotiating table.
You may not realize it, but you’re positioning and negotiating from day one of a sale. Be sure your priorities are well thought out or you might give a buyer the wrong impression which can have serious consequences. There aren’t any wrong answers – your priorities should be what you feel is important.
A prospective buyer may ask how long you’ll stick around after the sale and you may casually respond that you’ll be around as long as needed. Then you find out that the buyer is thinking about a two year transition when you and your wife had been discussing a potential move to Florida.
Something like that could blow up a deal. Had your initial response been that you would be around three to six months and then could provide consulting services from Florida, the buyer would not be counting on long-term support. Remember, it’s always easier to give the buyer more than expected than take something away.
As a seller, there are some common decisions you may have to make:
- Financing – Do you prefer a higher offer with some seller financing or a lower offer with cash at close?
- Transition – Are you looking for a quick exit? Does the buyer expect a lengthy transition?
- Employees – Sellers are often very protective of their employees. Will the buyer relocate or replace staff?
- Ownership – Are you looking to maintain a minority stake for yourself or your family?
- Legacy – Most sellers don’t want to cash out and watch the company erode. Ten years from now they want to look at a successful business that they had a hand in building.
- Real Estate – Is the buyer interested in your building? If the buyer doesn’t want your facility, how soon can you fill it?
- Trust – Do you trust the buyer? Some sellers will pass up higher offers to work with a buyer they feel better about.
Even if you know your preferences, you may not get everything you want when making a deal. A reputable business broker or intermediary will be sure that the right questions are asked to help you organize your thoughts, review your priorities and understand what the market will bear. In the end, you’ll find yourself in a better position to negotiate and close the deal—without sacrificing your goals.
Benefits of using a broker to sell your business:
- Confidentiality. A business broker will protect the identity of the company and contact only owner approved buyers through a blind profile – a document describing the company without revealing its identity.
- Business Continuity. Selling a business is time-consuming for an owner, and with a business broker, the owner can maintain a focus on running the business when a broker is working on the sale.
- Reaching potential buyers. Business brokers have the tools and resources to reach the largest possible base of buyers.
- Marketing. A business broker can help present your company in the best light to maximize the sale price. He or she has an understanding of the key values that buyers are looking for and can assist in identifying changes that can lead to a better selling price.
- Valuing your Business. Putting a value on a business is far more difficult and complex than valuing a house. Every business is different, with hundreds of variables that have an impact on the value. Business brokers have access to business transaction databases that can be used as guidelines or reference points. But the best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business, which is much more likely using the resources of a professional business broker.
- Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. An experience business broker can level the playing field for a business owner making his one and only business sale.
- Closing a Deal. Since the business broker’s sole function is to sell the business, there’s a much better chance that a deal will be closed in less time. The faster the sale, the lower the risk of employee problems, customer defection and predatory competition.