Business owners seldom plan to sell. Selling is event driven. Some examples of events that can force the sale of a business are partner disputes, divorce, burnout, health, and new competition. After sellers have decided to sell, they find that the unexpected happens. Here are a few events that sellers don’t expect.
The Substantial Time Commitment
Sellers find that the time necessary to comply with the requests of the intermediary and the potential buyers can take valuable time away from the actual running of the business. It takes time to collect the information necessary for the offering memorandum. Many sellers are unaware of the importance of the offering memorandum to the selling process.
It also takes time to meet and visit with prospective buyers. The intermediary plays an important role in screening prospects.
Handling The Confidentiality Issue
Many business owners are also the founders and creators of them. They tend to want to make all the decisions themselves. Business owners can have difficulty in delegating. They want to involve themselves in everything when it comes time to sell. This takes time away from running the business. The owner needs to allow his or her managers to be part of the selling process. Members of the management team have a lot of the information necessary for the memorandum.
Forgetting The Others
Many mid-sized companies have minority stockholders or family member who have an interest in the business. The managing owner may be the majority stockholder, but minority stockholders have strong rights. The owner must deal with these people. He or she must get an agreement to sell from the minority stockholders, and then convince them about the price and terms. Use a “fairness opinion” to help resolve some of the pricing issues. The managing owner must deal with the minority stockholders and family interests. If not dealt with, it could be the end of the deal.
The Price Is The Price Is The Price
All sellers have a price in mind. Most businesses go to market with a fairly aggressive price structure. When a prospective buyer presents an offer, it is generally lower than the seller anticipated. Sellers are never prepared for this event. They turn the deal down without even looking past the price. An intermediary helps structure the deal so it can work for both sides.
Not Having Their Own Way
When a potential buyer presents an offer, business owners think that they can call all the shots. They normally make all the decisions. An owner needs to understand that selling their business is a “give and take”. They can stand firm on the issues most important to them, but they have to give on others. Some owners want their attorneys to make all the decisions, both legal and business. It is essential that owners make the business decisions.
There is always the possibility that it will leak out that the business is for sale. It may be a rumor that gets started or it may be worse. Sellers must have a contingency plan in place in case of a confidentiality breach. A simple explanation that growth capital is being considered or expansion is being explored may subdue the rumor.
“Keeping Your Eye On The Ball”
The owner must still run the business, even with all that is involved in marketing a business for sale. This is very important. Buyers will know the progress of the business, despite the fact that it is for sale.