SELLING A BUSINESS – DO’S AND DON’TS
Selling a business - Do's and Don'ts
A Seller’s interaction with a buyer can have a huge impact on their ability to achieve top dollar for their business. In fact, this may be one of the most under-appreciated elements of a sale. You may have a thriving business but how you communicate with a buyer can make a world of difference in valuation and the likelihood that your business will even sell at all. I have been a part of countless “Wanna Get Away?” moments in meetings with Buyers and Sellers so I thought I would share some insights with you on how to put your best foot forward when you are meeting a potential buyer for the first time.
Do: Refer to your business as We and Us, not I. This is one of the most common mistakes that I see sellers make. It may not seem that important but the more you separate yourself from the company, the easier it is for a buyer to envision the company operating without you.
Don’t: Use the opportunity to vent about your frustrations. As common sense as this may seem, I have been in all too many meetings where the seller forgot they weren’t on their therapist’s couch. There is a way to discuss inefficiencies and conflicts in a manner that suggests opportunity. For example, if you know the Buyer is technologically savvy and it is an area you lack in, you can feed them a subtle ego boost while conveying opportunity for bettering processes or cutting overhead.
Do: Be completely honest with the Buyer. If you want to avoid a disaster down the road, be upfront with your skeletons in the closet. If they aren’t discovered now, they will during due diligence. Sweeping potential deal killers under the rug is more damaging than being upfront from the beginning.
Don’t: Oversell your company. Some sellers are so afraid of saying something negative about their business that they come off as a used car salesman. Yes, it is okay to highlight your company’s accomplishments. Don’t brag, overstate, or over promise unless you are prepared to put your money where your mouth is. My most common example: Seller states he anticipates 50% growth next year. Buyer’s solution: Make the purchase price contingent on future performance.
Do: Discuss your plan for how you envision a seamless transition. This is one of the best ways you can wrap up your initial meeting if there seems to be common ground. One of the buyer’s greatest fears is how the business will be transitioned. Come up with a plan before meeting with the buyer so that you can communicate it effectively. You can eliminate a lot of the buyers concerns by making them feel that you are going to be very hands on and supportive during the transition.
Don’t: Negotiate in person. I have seen sellers commit to something they wish they hadn’t in the spur of a moment. Buyers may put you in an uncomfortable spot at times. An easy way to avoid making a knee jerk decision is by asking the buyer to submit their proposal in writing. If they don’t respect this method, they are not a real buyer. They should appreciate the fact that you carefully consider your decisions. It demonstrates that you truly care about the best direction for the company.
