Tuesday, 2 October 2012
5 Keys to Keeping the Sale of Your Business On Track
Selling your business takes many twists and turns. Here’s how to ensure you stay the course
In every business, whether it’s manufacturing a product, providing a service or retailing to consumers, those who are successful in making sales share some fundamental characteristics. They all have a well-planned marketing strategy featuring qualified prospects, a detailed product (or service) profile that highlights the product (or service) features, and a clear definition of the benefits of a purchase.
The same can be applied to selling a business. But when it comes to selling your company, you also have to factor in the personalities and motivations of both the buyer and seller. To ensure you sell for the best price to the right buyers in a timely fashion, employ these five additional strategies:
Ask a reasonable price. Too often, inflated prices discourage potential buyers from giving the business any serious consideration.
In my experience, sellers who inflate the asking price in an attempt to create some “wiggle” room will find that buyers don’t give these businesses a second look. If they do, they are savvy enough to tilt the discussion in their favour, and negotiate lower prices because the lack of buyer activity makes sellers more anxious to discount the price.
A good litmus test is to honestly ask yourself if you would buy your business at the price and terms you’re offering. If the answer is no, you need to reconsider.
Focus on day-to-day operations. Continuing to operate the business as you always have is critical throughout the selling process.
You don’t know when a buyer will materialize, so the business’s financial performance needs to remain strong. When a buyer does come forward, it will be important to both parties that the business is moving in the right direction before and after the closing date.
Those who let their firm’s performance slide should expect buyers to view the most recent performance as the most reliable indication of present value and future success.
Maintain confidentiality. By interviewing and requiring all prospective buyers to sign a non-disclosure agreement binding them to complete confidentiality, all parties can comfortably communicate without impacting the business.
What would happen to sales if customers feared a pending sale might result in product delays or a change to product lines or services provided? Picture the performance of staff who worry that a pending sale will result in layoffs. What if your competitors found out and leveraged that information to steal market share, staff or suppliers?
By maintaining confidentiality, sellers will protect their current operation and be better able to transition a business that can appropriately plan and communicate the transfer of leadership to customers, staff, suppliers and competitors.
Negotiate, but don’t dominate. Business owners are used to getting their own way, but for a successful transaction all parties need to find common ground.
If you attempt to rule the negotiation, you’ll unwittingly stifle buyer motivation—a critical ingredient to overcoming the inevitable sale-process hurdles. Buyers who feel they can work with the seller are more likely to navigate the bumps in the road.
When both parties focus on the issues that are important to them rather than details that are not critical, they find themselves more satisfied with the results. They are more likely to work in concert with each other and less likely to throw in the towel at the first sign of adversity.
Keep the process moving forward. One of the easiest ways to keep the deal going is to establish timelines and meet them.
Few things kill deals like undue delays, which frustrate the process, slow enthusiasm and allow doubt to creep into the minds of buyers. Sellers forget that buying a business is risky. When a buyer has narrowed his or her options to your business, maintaining the buyer’s interest is imperative—once it’s lost, it’s impossible to get back. This does not mean rushing through the process. What’s important is to be open about the expectations and timelines, responsive to questions and willing to make the investigation and negotiations a priority.
Selling a business is not easy. The emotional tie you have to your business can make you do irrational things. The best way to prevent that is to remain objective and avoid the potholes along the way to realize your desired result.
Do you have a small business question you would like answered about this article or others?
Bill Sivell is a salesperson with VR Windsor Inc. [www.vrwindsor.com] 519-903-7807, which sells businesses to buyers across Canada and around the world. His 14-year career includes diverse senior management positions in marketing, advertising, sales management and operations management. His blog appears every Tuesday.