So, you have decided to become a seller. You have determined that even though market conditions are not absolutely ideal, your company is saleable.

This scenario is reminiscent of a little boy who cried “Wolf!” In our context, the story usually begins when a buyer approaches you (unexpectedly) expressing an interest in acquiring your company. Without adequate preparation, you proceed with negotiations to sell your business. Typically, the business is unprepared for the marketing process. In addition, you have certainly not had time to properly analyze who to approach and how best to approach potential buyers.

Instead, you go after the “low hanging fruit”—the single buyer who has approached you. In this case, you are not putting your best foot forward. In preparing for a sale, your “best foot” involves:
1) preparing your company for sale,
2) creating a thorough, professional confidential offering memorandum,
3) exposing the company to all interested buyers simultaneously (which has the potential of creating a buying frenzy) and
4) recruiting experts to play on your team—experts that the buyer is already using.

An effective and lucrative way to sell a business is to present it, in its best possible light, to all qualified buyers simultaneously, providing each with identical information. This information includes the certain knowledge that their competitors are also looking at your business.

It is highly unproductive to talk to prospective buyers before you and your business are prepared to talk to all qualified buyers. Are you willing to sell your business for less than its full value? By going into the market unprepared, you undermine your ability to do so.

Buyers are a fickle (or perhaps wary) group. They may not want to look again at a business they have already rejected. They justifiably wonder: Why is seller coming back? Is something wrong, seriously wrong, with the business? Has it suffered setbacks?

Buyers of businesses are like car buyers. Would you go back to an automobile dealership to look at the same car you decided was too expensive or did not fit your tastes the day before? Not likely. The only thing that will bring you back into the showroom is a significant price reduction.

The solution is obvious. Do not taint the marketplace. The temptation to talk to a potential buyer may be difficult to resist but you must keep the big picture in mind. If you decide what you want and need in order to sell your business before embarking upon a sale, you can help to avoid this mistake. Do not begin the sale process in a half-hearted manner, feeling your way along. By doing so, you may forfeit your best opportunity.

Contributed by Eric Nielsen, Sunbelt Business Advisors.

Sunbelt Business Advisors offer you unbiased information you need to know about Business Exit Planning.

Have something to add? Got a different point of view, want to play devil’s advocate, or just think we are all wet? Post your experiences or examples.

Tags: advisor team, business exit strategy, departure objectives, sale of your business, sell your business, third party sale, transfer of business ownership