This happens to HVAC company owners every week. I’ve talked to owners who get dozens of solicitations a year from private equity firms and brokers who’d like to talk about buying their business.
Business owners get these unsolicited “offers” because, once in a while, it works. A buyer gets an unprepared owner on the phone, makes what sounds like a good preliminary offer, and pressures them into starting the process of selling the business. The buyers aren’t bad people; they’re not doing anything wrong. But their strategy is designed to buy the company for the lowest price possible.
That’s not always in the best interest of the seller.
As a broker who has sold a lot of companies, I know that the sale price isn’t the only way a seller can lose money in the sale. It’s also about the structure of the deal: holding a note, deferring payments, committing to staying in the business for years after he or she no longer runs the show – there are plenty of ways an owner can sign on to a deal they regret.
When you start talking to a professional buyer, you’re going to be at a disadvantage. They buy companies for a living; you’re probably only going to do this once in your lifetime. Your business is almost always your most valuable asset – and your legacy. You’ll want to make a deal that funds your dreams for the rest of your life.
It can be easy to get caught up in a conversation you’re not ready for. Often, a professional buyer will lure you in with an anchor number – look for language like “we’ll pay you up to $2 million for your business.” An offer without due diligence isn’t serious, but owners can become fixated on the high number they heard the first time. The real offer might look very different.
Professional buyers often include time pressure and a sense of urgency in their pitches. “Our offer will only be good for the next week.” No one should be pressured into a quick sale; this transaction is too important and complex to be rushed. Time pressure is a sure sign that you’ll be at a disadvantage in any deal this buyer offers.
That’s why I recommend that owners never respond to unsolicited offers. The decision to sell your company should be proactive, not reactive. You should decide when and how you’re going to sell, and you should have someone looking out for your interests in the negotiations. If one investor or buyer is interested in your company, an experienced broker can find more qualified and motivated prospects. That’s the only way you’ll discover the true value of your company – by having multiple buyers competing to acquire it.
If you’re considering selling your business proactively or feeling intrigued by an offer that just hit your inbox, the best course of action you can take is to find out what your business is worth in today’s market. I always suggest getting a valuation completed no matter where you are in the process. That way if/when an offer comes, you have some real figures to compare it to. If you want to find out what your business is worth or compare numbers, be sure to take advantage of our complimentary opinion of value option on BusinessModificationGroup.com
