By Scott Bushkie
I see business owners approach the sale of their business with one of two mentalities. It’s either maximize my value, or just get me out at a fair price. There’s no right or wrong, but there are pros and cons to each approach.
We’re working with one seller, a younger business owner, who wants to run through the whole process and do everything he can to get the most out of his company. I always say these sellers want to go to sleep at night knowing they didn’t leave any money on the table.
Our full process typically takes several months (the national average is 6-12 months) as it means we do a lot of upfront legwork, we put together a package that really sells the company’s growth story, and spend countless hours researching potential buyers from all over the country.
The “maximize value” approach also means we list the business without an asking price. The goal is always to generate multiple purchase offers and create a competitive bidding environment.
If you get five offers ranging between the $10 million and $12 million mark, you can be fairly confident you’ve pinpointed the true market value for your business. That makes for good nights and sound sleep.
On the other side of the coin are sellers who simply want to get X value for their business. When they get an offer at that price, they’ll take it and move on. First person to the table wins.
We’ve seen that happen, too. Typically these sellers are older and burnt-out, or they’ve already done well for themselves in a previous enterprise and time is more valuable than money.
We had that happen with another seller. Less than a month into our engagement, before we had even gone to market, this seller received a call from an interested buyer—a buyer who promised he could “move fast.”
We don’t usually recommend the one-buyer approach, but it made sense for this seller. The benefit to this approach is that the process takes less time. Just talking to one buyer can typically get done in a three-four month timeframe. You still have to “sell” yourself to the buyer, but the process goes faster when you’re just negotiating with one party.
How much money did the second seller leave on the table? We’ll never know. But he knew exactly what he wanted, so I figure he’s sleeping okay at night too.
Now I don’t want to confuse the issue, but there can be stages in between a full-market rollout and single-buyer negotiation. When time is of the essence, or business performance is waning, we can do a limited rollout to a select buyer pool.
This allows us to accelerate the time frame while still maintaining leverage for the seller. Every deal is different and every seller has different needs. The trick is figuring out what you really want and then commit to working the process.
By Scott Bushkie
With more than 20 years in the Mergers and Acquisitions (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