InSight

Exit and Growth Strategies for Middle Market Businesses

Selling Your Business – It Is Not About You

By Marc Borrelli | Apr 25, 2011

The financial crisis has reduced the number of potential buyers, thus reducing demand. Strategic buyers are far more focused and private equity groups have been forced to put more equity into transactions. In addition, many business owners have delayed the sale of their business waiting on the recovery. But three years on, many business owners cannot continue to delay their exit much longer and will look to sell, increasing the supply of businesses on the market.

Supply currently exceeds demand, and typically when there is excess supply in a market, prices fall to restore market equilibrium. However since businesses are not a homogenous product, demand for the best businesses remains strong and they will be sold at good EBITDA multiples, but the rest may languish without a buyer. What makes a business the best?

It is not about you!

Buyers want to know what is in it for them. As marketers know, the key to good advertising copy is to tell a story. Don’t just describe the business with facts and figures, wrap a narrative around it that is a captivating story which tells value proposition and benefits to the buyer. With many companies for sale, you have only a few minutes to capture the buyers’ interest and hold it.  Remember – the first impression is the only impression. A good example of using a story to sell a product – Would You Buy A Wetsuit On eBay From A Bear At A Urinal?

As transactions usually require final approval from a committee of the buyer, the key to a smooth process is to make the committee’s job as easy as possible. How?  By making sure that (i) the business is easy to explain; (ii) your strategy is simple and executable; (iii) due diligence requests are quickly and properly answered; (iv) there are no issues that require long complex explanations; (v) there are no large unquantifiable liabilities; (vi) your business can operate without you; and (vi) the personal risk to them from promoting the deal is minimal.

Perception is reality!

Everything about the business must reinforce the perception that it is the best of the best. Get rid of clutter, make repairs, paint if you have to, increase curb appeal. All your books and records need to be in order and correct – if simple record keeping is incomplete, buyers wonder what is missing that they can’t see. A couple of years ago, while advising on the sale of a high tech engineering company, the company’s name was on the wall of its headquarters in 8’ letters. However, two of them were missing – the perception is that if they don’t care about how they look, what else is not up to quality?

Posted by Marc Borrelli.


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