Considering Selling Your Business? Wear a Buyer’s Hat!

Steven Stang, B.Sc. (Hons), MBAConsulting, Corporate Finance, Merger and Acquisition

Many business owners are planning to sell their business within the next 5 to 10 years.  If you’re one of them, using your business skills to think like a buyer can help you increase your exit proceeds.  Consider the following buyer tactics and issues in your sales process.

WAIT AND SEE.  Buyers adopt a wait-and-see approach to get the best price when you need to sell.  As a seller, then, you’ll need to contact multiple potential buyers and manage the time line for a competitive sales process and timely outcome.

TOO BUSY.  Buyers have limited time to determine if an owner is serious about selling, to identify the value in the business, and to do their due diligence.  You can increase the number of potential buyers by clearly identifying the value in the business, preparing an effective sales package, and having material contracts readily available.

BUY LOW.  Buyers like to take advantage of negative trends and buy low.  You will increase value when you time your exit to coincide with growth and good market conditions.  It is better to sell your business before you reduce your time commitment and take your foot off the gas.

LOWBALL OFFER.  It is human nature for buyers to lead with a lowball offer.  You will need to convince the buyer of the value of the business rather than to react emotionally and walk away.

VENDOR TAKE-BACK.  Buyers prefer vendor take-backs to reduce their equity requirements.  You will need to attract multiple buyers to insist on cash offers.

DEAL FATIGUE.  A business sale typically takes 3 to 12 months to conclude and deal fatigue can easily set in.  Be responsive to information requests and maintain a positive focus on closing a transaction.

 At Lazer Grant Corporate Finance Inc. we are used to assisting our clients in wearing both buyer and seller hats.  We would be pleased to assist you, too.