Saturday, August 29, 2009

When Selling, the More Buyers the Better

I cannot tell you how many times I hear from business owners who are contemplating the sale of their businesses that they have someone interested in buying their business and that they are going to negotiate with that single party. I’m certain it will come as no surprise that most of those deals never get done and, even worse, the owner spent countless months on a fruitless exercise. There’s also a strong likelihood that the owner spent the majority of their time chasing this deal only to find that the business is now suffering. This is not a hypothetical or isolated situation, we hear these stories on a daily basis from countless owners.

One of the critical aspects for a successful business sale is to generate many interested buyers. Multiple buyers vying for a single business will significantly increase the odds that your business is sold at the highest price with the best terms and in the quickest timeframe. Selling in the quickest timeframe should be of primary importance. The longer the business stays on the market the higher the risk that confidentiality will be breached and the value of the business will be diminished.

To illustrate, in the last 45 days our firm has had 2 deals terminated by buyers. In both cases the buyers were dragging the due diligence process out and positioning the deals for a renegotiation (which is very common when an owner is trying to sell their own business and working with just one buyer). Because we continued to market these deals to other buyers, when the above deals were terminated, within days, we had new deals negotiated and buyers in due diligence. We not only maintained the selling prices but in one instance we obtained better terms for our client.

A good business brokerage firm should be able to give you the leverage needed to ensure the best price and terms in the quickest timeframe. To validate that you are working with an above average firm make certain they have:

· Been in business for more than 5 years
· A large database of buyers
· A large group of brokers who are trained
· A large list of seller clients which indicates the health of their business
· One or more broker who hold the professional designation of CBI – this is a designation earned through the IBBA and takes years of training and experience

Remember, more buyers equal more leverage. This will dramatically increase the odds of a successful transaction.

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