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Value Creation Blog

Selling To The Highest Bidder Is A Good Thing

Posted by Josh Patrick

forsale-signI’ve heard it all. I want to make sure the buyer takes care of my employees, my customers, my suppliers, and my community. I agree you should care about that. Then you should ask yourself this question, “When someone buys my business why should they care about what I want?”

Know why you’re selling your business.

Not only is this a question your buyer is going to ask it’s one you need to answer. My first question to you will be “why are you selling your business?” If you’re working with me, I won’t just ask this once I’ll ask it until we get to the core reason you’re selling.

I usually find that you want to sell your business because you’re tired, you’re not making enough money, or you’re worried about the business prospering in the future. If any of these are true, you need to realize whoever buys your business is going to make changes. Changes you’re not likely going to like.

Understand why a buyer might want to buy what you’ve built.

Probably the best buyer for your business is the competitor you hate the most. It’s really pretty simple. If this is your best buyer it’s because they don’t like you very much either. They probably believe that by taking you out of the market their life will get better.

If they’re a sophisticated buyer they’ll tell you a great story about how they’re going to take care of all the people and things you really care about. They also know that most likely this won’t happen, they’ll have to make changes so your business fits into the way they do things.

At the end of the day your best buyer is really interested in your cash flow, plain and simple.

Understand why this person is likely your best buyer.

If you tell yourself the truth and you’ve found a buyer that’s really interested in your cash flow and what they can do to decrease your overhead you’ve found a strategic buyer. This is great news. A strategic buyer can afford to pay you more than someone who is just buying your company for a financial investment.

A strategic buyer can make tons of your expenses go away. They can afford to pay you more money and they believe they’re going to make more money because they can eliminate a lot of your overhead.

You have an opportunity here. Don’t spend time asking them to take care of whatever is important to you. Help them understand how buying your business will make them more money. Teach them how to do this. If you concentrate on them, they’ll likely pay you more money. If you concentrate on taking care of your “stuff” they’ll see this as an excuse to pay you less and do what they want as soon as they own the business.

Realize promises or what you thought were promises are not kept.

I’ve seen this too many times to count. A buyer comes in and makes lots of promises about how things will stay the same and that they really value what they built. As soon as the deal closes, the buyer makes changes and you wonder whether this is the same person who told you how much they value what you built.

This is the way the deal works. Buyers do with businesses they buy what they want. If you understand this going in, it makes it easier to go for the biggest paycheck. At the end of the day that’s all that really counts. Promises are often not kept. Your disappointment can lead to seller’s remorse. Be an adult. Don’t expect anything from your buyer except cash for your business. You won’t be disappointed if you do.

One of the things I always like to see is a business that’s sale ready. We have a short survey that you can fill out that will tell you some things about your business and help you understand where you have a value gap. If you’re interested in getting more information about this survey, go to our CoreValue report page and learn more.

Core Value Report

Topics: financial planning, wealth management, selling, stage 3,, stage 2,, salability,

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