It’s always a seller’s market for a good business. You should have no trouble attracting serious, qualified buyers, as long as you avoid the conventional selling process.
Your objective is to be in control of the situation, rather than being at the mercy of buyers. Most sellers list their business and deal with buyers as they come in and for as long as it takes to find a serious one. This puts you at a distinct disadvantage. You need to clearly convey to buyers the rules of the game. Your game.
Prepare Timelines
Don’t get caught in the trap of making it up as you go along. You need to have a roadmap for the selling process:
- Establish a time frame for your marketing efforts
- Set a deadline for receiving buyer inquiries and profiles
- Determine the date your Information Memorandum will be sent to all selected buyers
- Establish a time frame for preliminary investigations and site visits
- Specify date for submission of Letters of Intent and list all terms and conditions to be addressed in Letters of Intent
Prepare Your Information Memorandum
Armed with your recently completed business plan and your preparation for due diligence, you can now prepare an Information Memorandum that will be comprehensive and make a great first impression on buyers.
Simply rewrite your business plan with your ideal buyer in mind. What does your business have that the buyer doesn’t? What does your business lack that a buyer can bring to the table?
Your Information Memorandum should also clearly state your expectations of the transaction – the price, deposits and all significant terms, along with deadlines (see above).
Decide on Your Marketing Vehicles
There are many ways to get the word out about your business: direct contact with targeted buyers along with ads in newspapers, trade journals or on the internet. You may want to use all of these approaches because you never know how that perfect buyer will find you.
Related: Get the word out with the Pitch-to-Brokers tool
Make sure, though, that you don’t provide enough clues about your business that buyers will be able to figure it out. At this point in time, no one should know any more than the type and size of your business and the opportunity it presents.
Identify Potential Buyers
While working on your Information Memorandum, you should be developing your targeted buyer list.
Ideally, you want to find buyers who will stand to gain the most by acquiring your business. For example, a business in a different industry that has similar distribution channels and can easily incorporate your products into their system. Your objective is to demonstrate the synergy that can be developed. There is a lot of research involved but it’s time well spent if you can come up with a significant list of synergistic buyers.
Related: What Happens When a Business is Sold to the Wrong Person
Qualifying Buyers
Never give out any information about your business unless you know who you are dealing with. Simply having someone sign a confidentiality agreement is not enough, unless you already know a fair bit about them. If they are potential buyers that you have targeted, chances are this is the case.
For inquiries from ads, you will need to be a little more cautious. Try to find out personal information, present employment, previous business experience, how they intend to finance the purchase, etc. Serious and qualified buyers will understand that there is a need for disclosure by both parties. Buyers who refuse to divulge any information are likely just window shopping.
Letters of Intent
The Letter of Intent is simply a proposal outlining the terms of the deal and is generally a non-binding agreement. It is essentially a ‘promise’ by the potential buyer that he or she is prepared to follow through as long as nothing of concern is uncovered in the due diligence process. Make sure the buyer’s Letter of Intent covers all the terms and conditions of the deal.
Related: An end-to-end set of documents needed for selling a business
Don’t fall into the trap of negotiating terms one at a time. You simply can’t talk about price, for example, without knowing whether it’s for assets or shares, the financing involved, your after-sale requirements, etc. All the terms are interrelated. The Letter of Intent ensures that both sides see the total picture up front. You should spell out all the terms you want the Letter of Intent to address so that you will have a complete picture of the ‘deal’.
It is generally unwise to start negotiating before receiving a Letter of Intent. Savvy buyers may try to feel you out hoping you’ll inadvertently disclose something that will give them an edge. You may disclose more information about the business but avoid discussing the terms of the deal.
Negotiations
Once negotiations start, the deal is so close you can taste it. But there are still many things that can go wrong. After all, this is an emotional time for both seller and buyer.
Know Your Bottom Line
If you’ve done your preparatory work, you will know what’s acceptable and what’s unrealistic for you. You’ll be able to negotiate effectively and in a timely manner.
Don’t Take It Personally
Too often, sellers are emotionally attached to their businesses and become offended by certain things said during negotiations. Realize this is simply business and, if you’re going to take everything personally, you will jeopardize the transaction.
Look Out for Seller's Remorse
Even though you were sure you wanted to sell, this is the time when the reality of your decision may sink in. You know if the negotiations and due diligence are successful, someone else will be calling the shots and you’ll be leaving home, so to speak. This may cause you to subconsciously thwart the process.
Keep Negotiations Moving Forward
You don’t have to respond to each question on the spot. If possible, request that the buyer submits a list of questions in writing. This allows you to ‘sleep on it' and measure your response. But don’t take weeks to answer a simple question or dig up requested information. Your responses must be timely and professional.
Be Prepared
It’s an obvious fact that you should dictate your rules when you’re selling your business since your aim is to get as many advantages as possible from the deal.
In this case, you should follow these steps:
- Prepare timelines:
- Establish a time frame for your marketing efforts
- Set a deadline for receiving buyer inquiries and profiles
- Determine the date your Information Memorandum will be sent to all selected buyers
- Establish a time frame for preliminary investigations and site visits
- Specify date for submission of Letters of Intent and list all terms and conditions to be addressed in Letters of Intent.
- Prepare your information memorandum,
- Decide on your marketing vehicles,
- Identify potential buyers,
- Qualify buyers,
- Write letters of intent,
- Hold negotiations.
About the author: Richard L Woodard works as a content writer for https://writemyessaysos.com. He is fond of taking photos. In this case, Richard dreams of visiting as many countries as possible in order to take a lot of photos and take part in the exhibition to present his works to others.
