The Power of Matchmaking when selling a business
“How Do I Know if They Have the Experience to Run the Business?” – can be asked in a number of different ways, but the message is virtually the same: how can I be sure I’m finding the right buyer for the right company at the right time?
One resounding way in which I hear this same complaint translated sounds a lot like, “I don’t know what ‘that’ guy is going to do to my company.” Well, again, this concern can certainly be mitigated by paying closer attention to how, exactly, you find the right buyer.
So you are ready to sell your business, the business you have worked so hard to create and build. How can you find the right buyer, with the right qualifications, and at the right price? Making sure you will find the right buyer for your business is the best reason to use a professional business brokerage firm or business intermediary to screen prospects. The most successful and lucrative sale will be to that right buyer at the right time for the right company.
I tell people that my job as a business broker is a little like being a millionaire matchmaker. I wouldn’t be doing my job if I just went out and found my client the prettiest, tallest, blondest woman I could find (even if that’s what he “thinks” he wants at the moment). I have to consider dozens of other variables that will predict how the two will get along, what interests they share, how they will mature together, what they will talk about.
If you aren’t very discriminating in your choice of a life partner, you’ll likely end up divorced. If you are not being very discriminating during your screening process of prospective business buyers, then you could easily end up with a buyer who doesn’t have the experience to run your business and could easily, sometimes inadvertently, run it into the ground. That fear is especially pronounced when the idea of seller financing is mentioned. After all if you fear the buyer will run the business into the ground, the natural assumption is that you then will not get paid. As I discuss in more detail in other articles, that fear can be rendered groundless by including into the sale a number of guarantees that protect your interest, your investment, back into your company with seller financing such that you are very unlikely to lose your money.
Don’t succumb to the temptation of selling your business to the first person to show interest in your business any more than you would marry somebody on a first date. Don’t sell your business to “Joe Bob” who has been telling you at every neighborhood picnic that he wishes he could own “a company like yours” one day. Don’t even sell your business to a family member if they aren’t the right fit for the business. With an investment this important, you have a right and obligation to be discriminating.
A good business broker will vet prospective buyers in such a way that guarantees that you are dealing with a reputable individual or group that is purchasing your business.
Most buyers that have access to the type of money necessary to purchase your business probably did not get that money by being an idiot. If they did, a quick Google search and a few reference calls will show this sooner than they can admit, “I’m not really qualified.”
Your business broker will not just consider the financial equation (although that’s vitally important) but will also look at experience, reliability, and the right “fit” for your company. They also will watch for small signs of incompatibility that you may not have even thought about before. I have actually told prospective buyers that they can’t even look at the business because they were rude to my staff. WHY? Because these are the types of buyers that will be rude to your employees and clients as well. These are the types of buyers that will burn bridges and bury your business. You cannot afford the risk of a key employee storming out because of this RUDE new BOSS who wasn’t screened properly by your professional intermediary. If a prospective buyer is a jerk or an idiot, it is better to take a pass, regardless of the size of his or her checkbook.
There are ways to make sure you find the right buyer for the right company at the right time. Due diligence is as much a part of the process as preparing the sale documents. Even if we are being mercenary, you are looking for much more than just the buyer that is the highest bidder for your business.
There is much more to selling a business than the total price; anyone can offer big numbers in an offer to purchase and, perhaps, even back them up (for a little while). The real brass ring for anyone seller financing their business is, of course, actually GETTING PAID! Getting paid today, tomorrow and through the term of the loan.
It doesn’t matter if you get $10 million for your $2 million business or $100 million for your $20 million company. If you will never get paid a dime of that money, what difference does the selling price make? (Well, besides the bragging rights while playing golf with your buddies or having coffee with friends, that is.)
At the end of the day, this process is all about getting paid. Therefore, you need to make sure that you are using a reputable intermediary or business brokerage professional to ensure that you have not only a qualified buyer but one who is committed to paying you throughout the term of the commitment. Hire an intermediary or business brokerage firm that is not just out for the one-time commission, but is particular about the buyers they attract and has a history of doing so successfully for his or her clientele – one that is discriminating about who they even talk to about your business.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!