SELLING A BUSINESS; TIPS ON STRONG SELLING POINTS
M&A Brokers’ and advisors’ professional process for selling a business is known to generate the most successful results for business owner clients. This professional process works for selling a manufacturing business, spinning off a corporate division, or for divesting service companies. Part of the merger and acquisition approach involves building a clear, accurate, and persuasive “story”, emphasizing the strong selling points of the firm.
“Independent business owner” is a term that can have several different meanings. Naturally, it does mean one is the owner of an independent business. It can often define the personality of an owner. Think about the traits that made you and others you know successful business owners. Things like confidence, self-assured, strong-willed and independent likely spring to mind. They are vital entrepreneurial attributes, but can at times work against business owners when the time to sell a business comes around.
Most business owners have ample experience in selling products or service and making deals. After years of experience with customers and suppliers, it's not surprising that owners tend to approach selling a business with the same approach and tactics. However, most sellers who have spent years building a successful business are often unaware just how different the process of selling a business is from running a business.
Savvy business sellers realize how important a selling approach that is tailored to this very important process will depend on the guidance and experience of a top M&A Broker, investment back or business broker (also referred to as a business intermediary). After securing that professional guidance, sellers are then freed to benefit from their personal strengths rater than letting those strengths possibly interfere with the selling process. The following strong selling points are guideposts on the road to a successful business sales transaction.
Pricing Your Business To Sell
Business sellers are generally good business people – they have built and run a successful business, after all. As such, they naturally tend to want the best possible price for their business. While that is understandable, realistic pricing is perhaps the most important factor in selling a business from a point of strength. Understanding the marketplace as it is currently – not some high water mark reached in the past or that might be possible at some point in the future – is essential.
The valuing of a business and pricing a business to sell successfully differs from the more simple means of establishing value based on goods and services. This depends on industry-tested business valuation techniques with intangibles incorporated to ensure that the business will not be underpriced. The final selling price of a business is influenced by a number of factors, but intensity of buyer interest in a particular business is among the primary drivers.
Know Your Buyer
While sellers are adept at dealing with customers and vendors in their particular industry, they often are nearly as up-to-speed when it comes to sizing up potential buyers of their business. There are some “buyers” who are really just professional window-shoppers – always willing to look at a business that's up for sale and talk a good game, but in the end are never ready to “play ball.” There are other buyers who absolutely would play ball, if only they knew where the game was! Locating and then qualifying business buyers is a key function of professional merger and acquisition professionals, whether they are Investment Bankers, M&A Brokers or business brokers (for smaller deals). Those professionals will apply databases, professional associations and other national and international networks to increase the odds of selling a business at top value.
M&A Advisors will seek to pair the right buyer with the right business by focusing on those prospects who are both financially-qualified and genuinely interested in the business for sale. As a part of this process of qualifying buyers will help assess the ability of a particular buyer to run a business successfully. That helps to ease the fears sometimes associated with seller financing, which is often a necessary part of a successful business sale. This invaluable work by the M&A professional not only locates the best buyers, it also has a huge benefit to the seller because the seller can concentrate on his role in running the business successfully throughout the selling process.
Prepare Your Business for Sale
It almost goes without saying, but the business needs to appear clean and cared-for. Beyond that, there are critical steps the seller must take before putting a business on the market. In most instances, a business will sell based on the numbers. Your professional intermediary will help you create a clear financial picture of the business in a timely manner and prepare statements suitable for presentation to qualified prospective buyers. It's important to realize that while buyers may be willing to buy based on potential, they don't want to pay extra for that potential.
Sellers should be open about all aspects of the business that might affect the sale in order to prevent deals from self-destructing when the real facts come to light.
Business owners are naturally very accustomed to handling the paperwork that comes with running a successful business, but few have had exposure to the highly-specialized asset purchase agreements and other forms required before and during the business selling process. M&A Professionals are experts in those transaction details, which will in turn help guard against delays, issues and premature or inappropriate disclosure of information.
Maintain Normal Operations
It is vital that the business seller stays on top of the day-to-day running of the business, to ensure that the financial picture remains the same or improves while the business is on the market. When a business intermediary is on hand to focus marketing the business for sale, the seller can focus fully on keeping daily operations on-target. Sellers often have good “people skills” and may have visions of being able to woo a buyer with their presentation of their business. That's rare, but even if it were to happen, these sellers fail to realize just how many buyers they would have to woo to get to one that actually buys if they were handling the sale on their own. That is a role a business intermediary plays, which again frees the seller to focus on maintaining status quo of the business while the sales process is ongoing.
An adjunct to maintaining status quo is the critical task of maintaining confidentiality throughout the process. Until a stock or asset purchase-and-sale agreement has been signed, most sellers want to avoid disturbing or jeopardize the business's normal interaction with customers and employees. Alerting the competition is another pitfall of improper confidentiality. A top M&A Broker, Investment Banker or even a business broker will protect confidentiality when selling a business in three ways.
1. In marketing the business, the business intermediary will use non-specific descriptions of the business for sale.
2. They will require signed confidentiality agreements.
3. Perform a careful screening of all prospective buyers.
In order to keep the sale of your business on solid ground, it is important to be sure your strengths as an independent business owner are not actually weakening the sale. Using the key business selling points discussed in today's blog, along with the expertise of a business intermediary or M&A Broker will keep the process of selling your business going strong.
About IBG Business:
IBG’s professionals have provided merger and acquisition services to the US middle market since 1986. Their award winning M&A broker and advisor experts have an industry leading track record of 1,100 + successful transactions.
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Reprinted with edits with permission of Business Brokerage Press, Inc.