Considering the Sale of Your Business?
Look Before You Leap!
By: Theodore P. Burbank, FCBI
Do thoughts of selling your business cross your mind from time to time? Undoubtedly you
have a pretty good idea of what you believe your business is worth. But what will it bring
on the open market? Is now the best time to sell? As you contemplate the sale of your
company, additional questions will usually arise: Can I receive an all cash price for my
business or will I have to offer terms? How do I maintain confidentiality while marketing
First Step, Obtain Answers and Information
You need answers to these and other marketplace related questions before an intelligent
decision can be made. Although personal considerations usually motivate thoughts of
selling, the money involved is important also. Most business owners have a significant
portion of their net worth tied up in their businesses. It is, therefore, doubly important
to "look before you leap."
Your first step should be to contact an experienced business intermediary to gain
answers to your questions. Their experience and knowledge of current marketplace
conditions is critically important to you as you consider your decision to sell.
Buyer Identification -- "Fit and Opportunity"
Ask the intermediary to develop a comprehensive business profile and buyer
identification summary. The report will allow you to view your company from the
"outside in," and understand what the business will be worth to the array of
buyers currently active in the marketplace.
The principal benefit of this step is to allow the business owner to evaluate the
probability of attaining personal goals via the sale of the business (or other options)
without exposure in the marketplace. The report also allows a view of the business through
the eyes of the various buyer/investor types in order to identify who will recognize the
The "fit" and opportunity the investor and his advisors identify in the
business are most important. A business may be seen as worthless by one yet be worth
millions to another. The difference is the "fit" and opportunities recognized by
the buyer. The person who perceives the most opportunity pays the best price.
When the decision to proceed with a sale has been ratified, the profile of the best
candidate(s), the buyer most likely to purchase the business at the optimum price, has
already been identified by the intermediary's report.
Identifying the right buyer is important because if a business is over exposed in the
marketplace through exposure to the wrong buyers, it tends to lose value. Therefore, it is
essential that the "Right Buyer's" profile be correctly identified before going
If the probable results from a potential sale are deemed inadequate, then the
intermediary's work becomes an important management tool. A plan to "prepare the
company for sale" or to achieve other alternative objectives can be constructed using
the report as a base line.
What can happen when sale is attempted without first preparing for sale? Without prior
preparation, marketing efforts may begin prematurely and proceed without proper focus.
Perhaps the wrong buyers will be approached. For example, competitors and suppliers are
usually poor candidates. They generally will not attribute a great deal of worth to key
value elements such as: consulting and training agreements and may not perceive much value
in a covenant not to compete, and focus solely on the value of assets (equipment and
If sale is attempted without proper preparation marketplace realities are learned the
hard way. The business usually becomes overexposed resulting in lowered perceived value.
Or a breach of confidentiality results in the loss of customers, credit or key employees
which actually lowers or destroys value. Many times the right buyer rejects the
opportunity based upon incorrect, incomplete or misapplied information. The price may have
been set too high resulting in no offers or "low ball" offers. The price may
have been set too low resulting in loss of dollars representing years of hard work.
Do It Yourself?
There have been many books (including ours) written on buying, selling and valuing
businesses so an owner, with the help of his accountant and attorney, might feel he could
sell the business without additional support. However, experience suggests that the
business owner and his or her advisors need the marketplace savvy that an experienced
intermediary can provide in preparing the company for sale and obtaining its optimum
It may not be easy to find an individual or firm experienced in providing this
sophisticated preparation service. Historically this advantage has been reserved for large
or public companies and was only provided by Wall Street investment bankers. However,
those capable of providing this service to smaller private and family businesses can be
found with a little digging.
Two good starting points are: Institute of Certified Business Counselors, Eugene, OR
and International Business Brokers Association, 11250 Roger Bacon Dr., Reston, VA 22090.
Both can provide a roster of members who have been accredited professional designations in
their fields (CBI, Certified Business Intermediary and CBC, Certified Business Counselor).
If you are considering the sale of your business, you need every advantage you can
garner, primarily preparation, experience and knowledge. Be you have it on your team!
Mr. Burbank is President of Lighthouse Financial, LLC and
since 1979 he and his associates have consulted with and provided valuation, marketing and sales assistance to more
than 2,000 family and private business owners. He is the
author of "In & Out of Business . . . Happily" - "Buying a
Business Made Easier" - "VALUware 6.0" Business Valuation
Software - "DealMaker 4.0" Business Acquisition Software -
"DealMaker docs" Transaction Documentation Software all published by
Parker-Nelson Publishing. In
addition he is a contributing author to "Merger and Acquisition Handbook
for Small and Mid-Size Businesses" and "Business Valuation
Handbook" both published by John Wiley and Sons
and has written many articles on business sales and valuations. He has conducted
seminars and addressed many trade associations in the US, Canada and abroad.
Ted is available for private consultation, valuation and
acquisition assignments. He may be
reached by telephone: 508 794-1200 or by email: email@example.com
This article has been condensed from the book "In
and Out of Business... Happily."