“How to” advice is ubiquitous in the world of business and no less so in the field of buying or selling a business. Where most of what is out there leans to the technical side of readying your business for sale, there isn’t much written to guide the seller through the process from listing your business to closing day.
Having been through the process a few times, I would like to share three pieces of advice for sellers of businesses:
Often the business gets to a point that is past its ‘peak performance’. Owners have slowed down in the past few years where lifestyle considerations have shifted their primary focus from the business to other things. Now is the time to run your business with that same level of energy and focus that you used to. We want to put your best foot forward, and show the buyers that this is a robust opportunity with satisfied customers and a bright future.
One client recently followed this advice and had his best 6-month period in the last five years. It facilitated the sale and put more money in the sellers’ pockets by the time closing date arrived. As some of the payout was based on a performance-based payout, the growth in business meant the purchaser started off with a full book of business – good for him, and good for the sellers. It’s a win-win when the business is firing on all cylinders.
One client had land, buildings, and business for sale and asked us if we would list their property on the Multiple Listing Service in their city and area. Our answer was a resounding “no”. Publicizing the sale of your business too soon can be its kiss of death. Recently I read about a business that announced its intention to sell on Kijiji and other social media. Not only did staff start looking for other jobs, but suppliers and customers began to wonder if the business had actually closed its doors. Needless to say, open publicity had an impact opposite to what was hoped for.
We promote our clients business anonymously. When we get hits from interested buyers we first vet them. We want to be sure they are legit, not working for a direct competitor, and have the financial capacity to follow through on an offer. Only then, and with the approval of the vendor, do we execute confidentiality agreements and reveal who are client company is.
By putting the “For Sale” sign out to the world you don’t know who will see it or how they might react. Competitors, suppliers, customers and staff don’t need to know too early in the process.
It can take a long time to sell a business, and that length of time will vary based on many variables. These can include the uniqueness of the business, selling price, location, competitive environment, and more. We typically expect that it will take six months to one year to sell a business – more if it’s especially unique or narrow in its appeal.
Recently, we had a great business listed for sale. The price was a bit on the high side and the industry was just starting to come out of a downturn. We promoted the business (anonymously) within our network and through aggressive campaigns. In the first 6 months we had seven inter3ested prospects, but the list got whittled to one. In months seven and eight we generated interest from 8 more prospects, four of whom are now actively engaged in discussions.
In other words, it can take time to find the right matches at the right price and timelines. Unlike the housing market, due diligence periods, analyses, financings, and other elements of a business sale, can take longer.
Your broker or representative should be able to provide regular updates as to their sales and marketing activities. You have every right to complete transparency of process and activities . But be patient. It takes time.
If you would like to explore selling your business or would like to attend our upcoming event on selling a business, please contact me at firstname.lastname@example.org. (The event will feature recent business sellers who will share their experiences and map out some do’s and don’ts, as well as professionals to discuss tax and related financial implications.