Avoid Selling to Just One Buyer
One Buyer is Almost Like Having No Buyers
I recently had a situation that a lot of business brokers experience. A business owner contacted me about his interest in selling his company, so we spent some time talking about how he got into the business, why he wanted to sell the business now, what he planned to do after he sold the business, etc. I wanted to hear his responses to some of the soft questions that buyers ask.
We then got into the details of his financials for the prior three years, some of the factors that make his business different, and what valuation the business owner could achieve in the sale of his business.
The next topic was slipped in, almost as an afterthought by the business owner. He had been talking to one buyer who had approached him about three months earlier, and the business owner didn’t want to take his business to market until this buyer decided not to purchase the company.
I told the business owner that would be a mistake for three big reasons:
- It takes months of reaching out to thousands of potential buyers for professional business intermediaries to find a limited number of buyers truly interested in acquiring each company they represent. The probability of the business owner’s single buyer, who just happened to come along, actually closing the deal is close to the odds of winning the lottery.
- The idea of talking with this single buyer for months on end, despite little progress on an actual deal, was tempting to the business owner, because he’s thinking of saving the success fee due at closing. However, he’s wasting a ton of time dealing with this unmotivated buyer, taking his attention off the job of running his business – which causes decreased value of his business. And the endless meetings and questions are often designed to wear the seller down in order to get a lower price; and
- Without the concern of other potential buyers likely to swoop in and purchase the business, the single buyer keeps on postponing his decision with yet another request for more information. It’s kind of like dating. If you’re dating a young lady on an island with no other men, what’s your incentive for asking the lady to marry you?
By using a professional business intermediary/business broker, the business owner can leave the buyer-search process to the professional, spend more time increasing the profitability/value of the business, pressure the single buyer to make a quicker buying decision, and ultimately sell the business quicker and for a higher price than as a DIY project.
The Summit Acquisitions Group — Business Brokers and M&A Advisors — specializes in the sale, appraisal, and financing of privately owned companies ranging in valuation from $750,000 to $25,000,000. Contact their offices in Atlanta, GA or Charlotte, NC for a free consultation.