A Small Business is Bought, Sold and Valued under Unique Rules and Environment
Each of the following items must be addressed appropriately and in a specific sequence for a successful business sale to occur.
1) “Sell it quickly but don’t let anyone know it’s for sale.”
In other words, maintain utmost confidentiality. Many unfortunate occurrences can and do happen when people know, or think they know a business is for sale.
2) “I don’t know what the business is worth, but I know what I want for it.”
Essentially every business person we have worked for has eventually confided that they did not know what their business was really worth. All had an idea of what they would like to get for their business but really did not know its value in the marketplace.
3) “Ask twelve people and you will get twelve different answers”
If the twelve people you theoretically asked for an opinion of value were potential buyers, the one who produced the highest value would be the right buyer because he recognized the most opportunity. Only the “Right Buyer” will pay the “Right Price”.
4) “Future value of the purchase is dependent upon who buys it”
We all have witnessed a “down at the heels” business come alive and prosper under new management. Regrettably we have also witnessed the opposite. What made the difference? — Right buyer—Wrong buyer.
5) “Light Manufacturing or Distribution”
A majority of buyers come to us and profess to be in search of either a Light Manufacturing opportunity or perhaps a Distribution company. This seems to us to be a code for “I really don’t know what I want to buy but I would feel dumb telling you that.” Eventually virtually all buyers admit they really did not know what they wanted to buy. They knew what they did not want and, as with art, would recognize the right opportunity when they saw it.
6) “Third parties refuse to ratify the wisdom of the purchase”
Banks cannot lend on goodwill. They need solid assets that can be converted readily to cash. Business equipment and inventories are not favored collateral with bankers.
7) “Selling a business is a life-style or personal decision and not purely a financial matter”
What other transaction can you imagine that involves such a high degree of personal involvement and financial uncertainty?
8) “What business profession complains they have too many customers?”
Business Brokers! Yes, those who sell businesses for a living will tell you that buyers drive them crazy. It seems everyone either says they are a buyer or knows one. Buyers are a dime a dozen. Finding the right buyer, now that’s another story.
9) “A business is to its owner what a child is to its parents.”
Your business is your baby and you do not have to sell. You are thinking of selling? Isn’t that like putting your child up for adoption?
10) “Appropriate advice is difficult to obtain”
Accountants, CPAs, MBAs, attorneys, financial planners and other professionals are all well schooled in Public Company protocols but are seldom aware of how they differ from Main Street or Private business realities. Attempting to apply Public Company protocols to Private Businesses is a lot like trying to play Cribbage using the rules for Parcheesi.