Getting the Best Price for Your Business
A friend writes: “When people wanted to buy my company, I wasn’t ready to sell. When I became ready to sell, nobody wanted to buy. Is this just the capriciousness of life, or is there a pattern?
“The passion of a buyer, his or her readiness, seems to be more of a driver in transactions than the readiness of the seller. Is this true in your experience?
“I’ve had a discussion this morning with ChatGPT on the subject, asking if there were any quotations describing this phenomenon. There were plenty on the secrets of selling but none on this particular concept. So we (me and the machine) went about trying to create one. Through our dialog, I came up with the following, which ChatGPT agreed was good (such a good little robot): ‘Sales are driven by the buyer’s urgency, not the seller’s emergency.’
“I could see you riffing on this. For example:
Advice to a desperate seller. It’s not the price. Don’t focus on discounting your way to a solution. Think instead of building urgency, or at least desire, on the part of buyers. Do this with persuasion – copywriting, photography, video, all the tools of storytelling.
“What do you think?”
My Response: This problem is common for owners of small and even medium-sized businesses. When things are going well and cash is flowing and their bank account is rising, running the business is fun and they aren’t likely to think about selling it. But when the economy, the industry, or the company itself is doing poorly, they are going to think about it – especially if they are at or near retirement age.
I don’t have the space here for even a portion of the thoughts I’ve had on this subject. But if you are in this position, here are a few that might help…
Don’t ever allow yourself to value your business based on what you’ve heard others have got in selling their businesses. The stories you hear about are almost always exceptions to the rule.
Develop your own metrics based on a formula you would use to value a business like yours (in terms of industry, product, size, revenue, and profit history) and make it a regular part of your thinking while the business is going strong.
Then once a year, ask yourself a few questions:
* What could I get for it based on my formula?
* Who do I know in the industry that would buy it?
* What is the one thing about my business I wish they don’t find out (because they will)?
* Are there serious buyers aside from my competitors?
* Is it possible that one of my key employees would buy it?
* If so, what kind of financing terms could I offer?
Make a list of potential buyers and keep in touch with them. Periodically joke about you buying them out or them buying you out. It’s just a joke, but you will be planting a seed that you may one day harvest.
And finally, this: If you do find a buyer and he’s willing to pay the price you want, take a step back and ask yourself: “Is selling my company really the right move?”
I’ve been on both sides of this many times over the years, and those experiences have left me feeling doubtful about selling. I can think of several times when buying a business proved out to be a great thing, but I can’t say the same about selling. When I think about the businesses I’ve sold, I always wonder if it wouldn’t have been better to have sold enough shares to get the cash I wanted but maintained control so that the new “owner” didn’t ruin it.
