Your business is your own business (literally and figuratively), and the choices you’ve made over the years were right for you at the time. Logically, you know that, but everything feels different once you list your company for sale.
Buying a company is all about the numbers. If the price and the value match, a buyer will make an offer. It’s as simple as that. However, to find out if the value is right, the buyer will ask a lot of questions. Not just when, how much, and how many, but also why. Why did you decide to do this? Why did you choose not to do this?
Granted that some buyers have better communication skills than others, it’s not unusual for a seller to be annoyed at having to justify his decisions. For the seller, it’s not just about the numbers; it’s personal. And they sometimes take the discovery process personally. Here’s how I talk to them about it.
First, we’re selling the business as it is, not as it could be. In other words, there’s no need for the seller to “sell” it or inflate its worth. If it’s a good fit for the buyer, it’s a good fit. If it’s not, it’s not. But they need plenty of information to determine that. Whether they’re writing you a $500,000 or $5 million check, it’s a lot of money. They want to know what they’re getting, warts and all.
And no business owner has run a company without making mistakes along the way. I have a client whose company had a one-time $75,000 expense a couple of years ago. He’d hired a company to make outgoing calls, and they’d worked hard to comply with the Do Not Call Registry lists. But a couple of calls had slipped through, and the owner was fined $75,000 for the violations. He was embarrassed and angry about it, and when the buyer questioned him about it, he became embarrassed and angry all over again.
This is understandable but not helpful. Of course, a buyer wants to know what happened, why, and how the owner fixed it so it doesn’t happen again.
The diligence process can be long and complex and feel invasive. But it’s necessary if you want to get a good offer for your company. Experienced salespeople know that when someone starts raising questions or objections, they’re actually getting serious about purchasing.
A buyer will ask questions – sometimes tough and pointed ones – in order to get reassurances on one or more of four things: Personalization, Perceived Value, Performance Value, and Proof. They want to know whether the business will be a fit for them personally, for their future goals, and current skills. They want to make sure their perception of the company’s value matches the actual performance of the company’s profitability. And they want to be assured that an owner can prove the statements made.
My job as a broker is to ensure buyers get the information they need to make an informed decision and help sellers respond quickly and communicate clearly without taking anything personally. It helps to have a third party whose experience means they are rarely surprised by questions or answers; we’ve heard it all. As long as the two parties continue communicating in good faith, the deal will keep moving along.
If I can help you get your business ready to list, a good first step is to determine what your company is worth.
