Owners Who are not Committed to a Business Sale
In the last issue (#74) we provided insight into the obstacle: Owners Who Try to Sell the Business Themselves. In this issue we'll discuss a similar obstacle: Owners Who are not Committed to a Sale, which often arises when owners try the do-it-yourself approach.
A Favorite Famous Quote
"There's no abiding success without
commitment." Anthony Robbins
Owners Who are not Committed to a Business Sale
As we continue to try to figure out why only 20-33% of all small businesses are ultimately sold, we have to discuss owners who do not truly commit to selling their business.
If you try to sell your business without being fully committed to doing so, the results could be painful or even disastrous.
The danger of working informally with multiple business brokers
A few years ago, after a prospective seller declined our offer of a no-charge, no-obligation evaluation, I received these words in an email: "if you have a buyer that is specifically interested in our business or a business like ours, we will be happy to engage in a more detailed conversation."
I responded, in part, with: "By taking this approach with me, or any other broker, you have several potential problems. First, and most importantly, you have a confidentiality problem. I will not act on your words, as written, but another broker might view those words as authorization to discuss your business with a prospective buyer without obtaining a confidentiality or non-disclosure agreement from the prospective buyer, which could lead to severe confidentiality issues for your business. Second, without having completed an evaluation, other than what is on the website, I know very little about your firm - not nearly enough to adequately discuss it with a prospective buyer. Third, I have no idea as to the fair market value of the business, nor whether that value matches your expectations."
My response continued: "I hear the words ’if you have a buyer’ from prospective sellers a fair amount of the time. The fact is, we probably have multiple buyers with an interest in your type of business. But so much is dependent on the value of the business and whether that value matches your expectations. Again, that's one of the benefits of the no-charge, no-obligation evaluation. You will know the current market value (and how the value was derived) and you can determine if that value meets your expectations. If it doesn't, then you can take the necessary steps to improve its value."
"Dipping your toe in the water" is not likely to produce desirable results
One of the keys to a successful sale of your business is preparation. You need have an understanding of the process, including the need for confidentiality. "Dipping your toe in the water" is not likely to produce desirable results. To the contrary, it may be more likely to produce undesirable results. You run the risk of confidentiality issues arising whereby your customers, employees and suppliers hear rumors that your business is for sale.
The risk of a confidentiality breach when selling a business
The possibility of a confidentiality breach increases exponentially when you have conversations with industry insiders, or friends, (or even with some unethical brokers) and utter words such as "if there were a buyer..." Individuals you talk with who have not signed a confidentiality agreement may talk with others who have not signed a confidentiality agreement, and pretty soon one of your customers, employees or suppliers will be asking you about a rumor they heard. Be careful.
It is important to fully understand the process of selling a business. A qualified intermediary (business broker) will confidentially evaluate your business to help you set expectations and identify obstacles so you can make an intelligent decision to sell or not sell. If you decide to sell, the intermediary should also pre-screen prospective buyers for qualifications and financial capabilities and obtain a confidentiality agreement before releasing any information on your business.
Be prepared and make a commitment
To sell your business, you'll have to make a commitment to do so. To enable you to make that commitment, you need to (1) educate yourself, (2) understand the process, (3) evaluate and decide and (4) prepare for the sale. Less than a full commitment is not the way to go.
Six examples of owners who may not be committed to a business sale
1) An owner with an overpriced business
2) An owner with incomplete financial information
3) An owner who does not understand the tax implications of a sale
4) An owner who has not evaluated if he can afford to sell
5) An owner who wants to sell his business and real estate, but does not want to pay for a real estate appraisal
6) An owner who is not aware of the obstacles he may encounter in a sale
At this point, do you have .....