By Scott Bushkie
Our team at Cornerstone is going through a leadership transformation class with Initiative One. And one of the things we’ve learned is the value of impeccable communication, internally and externally.
We have to remember that most business sellers don’t know what they don’t know. We can’t take anything for granted because assumptions can lead to unpleasant surprises that stop us from getting to the closing table.
Here’s what impeccable communication looks like when selling your business:
Share your flaws. I call this “go ugly early.” Maybe one of your top managers is about to quit, you’ve heard a rumor your key supplier is in financial trouble, or you just lost one of your top customers to a competitor. Whatever the challenge, be honest about it right away. This gives buyers a chance to self-select out of the process, before you spend valuable time talking with them. Moreover, it preserves your credibility and establishes goodwill for negotiations going forward.
Ask for what you need to hear. Plenty of salespeople, in any industry, will tell you what you want to hear, just to get your business. That’s a particularly dangerous thing when it comes to selling your business.
If you’re like most business owners, your company is your largest asset and you only get one chance to sell it right. Whether you list your business with a public asking price or set a private internal benchmark and go to market with no asking price, make sure that value is realistic in terms of what the market can bear.
Overpricing your business can lead to years of frustration and wasted money. I’ve known business owners who sat in a holding pattern as their energy and drive burned out. By the time they readjusted their expectations, business value had declined even further.
Be clear about what you want. By the same token, acknowledge what you want out of the business sale. Don’t tell your advisors or a buyer what you think THEY want to hear.
How long are you willing to stay on after a sale? What else is important to you? Money, legacy, the employees? Think beyond value and purchase price to what really matters most to you. And then be honest.
Don’t tell us you’ll stay as long as the buyer wants, if that’s not what you (and your spouse) really want after a sale. Because when push comes to shove, you’ll end up sabotaging your own deal.
Stay current. Years ago, we could update client financials once every six months for active engagements. Today, as market expectations change, and the deals get bigger, buyers expect up-to-date numbers, month to month. If you’re behind in getting your financials prepared, that says something to buyers.
Be available and demand availability. Time and availability are essential to impeccable communication. The months your business is on the market are incredibly important. You want to sprint to the finish, keeping performance strong. But selling your business will take extra time, no matter how diligent your advisor.
You need to answer phone calls, provide updates, and help lead facility tours and management meetings. You need to prepare yourself that you’re going to be working more hours than typical.
Similarly, look for an advisor who will have time for you. Find out how many clients they work with at a time, their average months to close a deal, and how often they’ll communicate. I’ve heard from sellers who literally didn’t get one phone call in a year. Your advisor may have the best process and buyer reach, but if they don’t have the time to work with you, the likelihood of selling your business is diminished.
Share your news and ideas. Selling your business requires a strong partnership between you and your advisor. When something good happens, we want to know about it right away. And when something bad happens, we need to know that too.
The best transitions happen when you and your advisor are in constant communication throughout the sale process. Many times we find that sellers forget to share certain ideas with us the first couple of times we talk.
We have a very sharp client right now with an incredible business, but we’ve had conversation after conversation and we’re still peeling back the layers. He remembered to tell us about some new proprietary technology they were implementing, just as we were preparing a counter-offer in negotiations.
Selling a business (really just “doing” business) is a team effort. You have to trust your team and build a comfortable working partnership—and that only happens with impeccable communication.
By Scott Bushkie
With more than 20 years in the M&A industry, Scott is a recognized leader in the field, providing exit strategies, business valuations, and M&A advisory services to business owners in the lower middle market. He has successfully executed sales to domestic and international buyers, private equity firms, family offices, and strategic buyers. Follow DealCoach on Linkedin