Don’t Sell Your Business Just Because Someone Makes An Offer

Many times, a client starts thinking seriously about selling their business because an ostensibly “serious” buyer makes an offer. The owner wasn't thinking about selling their business until they received that call.

The owner is excited by a quick sale and a big payday. They went from viewing the whole business sale process about as attractively as they would a kidney stone to suddenly seeing a rainbow with a pot of gold at the end. As a result, the owner often over-invests in a single potential buyer. The problem is that it's unlikely that the buyer will actually close the deal. Not because they are dishonest but because most deals don't close. Just because someone is searching for information on which new cars are most fuel-efficient does not mean they are ready to buy a new EV today.

When the owner over-invests in one buyer, bad things happen, or good things fail to happen. The owner may be strung along, jump through many unreasonable hoops, and be distracted from actually running the business. Often, the owner neglects or declines to find other potential buyers. Fewer bidders mean a lower price; it also means that the one buyer controls the tempo of the conversation and the negotiation.

The buyer may go silent for weeks on end. And they can afford to because there is no competition. The longer a buyer engages in an acquisition discussion with no apparent competition, the more the buyer can start to wonder about things like whether the absence of competition means that there is a deal-killing flaw that they have overlooked. They wonder why they are the only ones apparently interested. They begin to either lose interest or treat it like a liquidation sale rather than a premium purchase.

When an owner depends on a single buyer, typically, they are acting passively. They tend to become very emotional about the whole process and end up capitulating to the buyer's timeline, terms, and conditions. They often fail to engage advisors for the transaction, such as a valuation expert, accountant, and attorney, who are all key to a successful sell transaction. Rather than preparing themselves for a selling process and preparing the business for sale, they hope the buyer is simply eager to buy, and they can make fatal strategic decisions.

A company sale does not work that way. A successful business sale never takes place when the owner is just along for the ride; they need to decide consciously to sell and then engage in the process fully. They can still change their mind later, but by engaging fully, they are both managing the selling process and their business so that it continues to thrive, and they are not acting emotionally but from a position of power and choice.

If you are thinking about selling your business or in the middle of a transaction, we can help you get the best deal for you by with our strategic and valuation advisory services.