For some of us, we’re going to want to sell our business to an outsider or third party at some time. When this day comes, we want to be courted, wooed and sold to the company who will provide the best all around package for us. In my experience the best way for this to happen is when my clients are able to put together a controlled auction for their business.
Your sales intermediary typically runs a controlled auction. This person or firm will find several buyers who are interested in your business and then they will run an auction that will allow potential buyers to bid on price, terms and other issues that may be important to you when you sell your business. Not all businesses can be marketed through a controlled auction process. Often these businesses aren’t readily salable and finding one, much less several buyers will be problematic.
Some of the reasons you will want to have a controlled auction for your business is as follows:
A controlled auction will often bring a higher price for your business. Because there is more than one person bidding on your business the buyer will be sharpening their offer knowing there are other real buyers out there who want to own your business. I often talk about hoping to find a stupid buyer. We find that when a business is marketed through a controlled auction process, the stupid buyer appears more often than when there is only one buyer.
You as a seller will be in the drivers seat. When there is only one buyer for your business, the buyer is in control. They will often get you to hold paper which in my opinion is not really part of a sales price. In a controlled auction buyers know there are likely to be at least one if not more cash buyers in the mix. A serious buyer in a controlled auction will know that the cash component of the deal will have to be higher than when there is a negotiated purchase.
You will have a stronger business to sell. If your business qualifies as a good candidate for a controlled auction it means that you’ve done a good job of getting your business ready for sale. You will have made yourself operationally irrelevant and systemized all major parts of your business. Businesses that have done this are usually more profitable and better run that businesses that haven’t. Doing the right things before you sell your business will often mean that others will be willing to pay more for you business.
If your business doesn’t get the offers you want, you can take your business off the market. Because you have taken the time to systemize and organize your business as an enterprise others would want to own, you often will have a well run business that provides you with good to great cash flow. If you have to wait till market conditions move to a more positive place, you can still enjoy your positive cash flow and run your business as a passive owner. I believe that having this option is always an important one as you think about selling your business.
The important point to remember is that when it comes time to sell your business, you need a controlled auction as part of the process. As you interview intermediaries you will want them to bring up the subject of a controlled auction. If they don’t, then you will want to move on to your next potential sales partner.
Have you thought about controlled auctions? And, if so is this part of your plan when it comes time to sell your business?
We have put together a complementary coaching process called The Exit Planning Assessment. This process provides a coaching call on eighteen key areas a buyer would look at in your business. You will have a call with no charge as well as a report that outlines a projected value of your business, the gap you could fill and strong and weak parts of your business. Click on the button below to start the Exit Planning Assessment process.