Free Advice

The subject of this newsletter relates to presenting a business for sale. However, the ideas covered here are applicable to all sales situations.

Presenting your business --- use an ACTIONä plan

Over the years I've talked to over a thousand business owners and looked at selling packages from hundreds. Most assume either the buyers are complete fools or the seller’s are so naïve they think a couple years of financial statements and their verbal representations will make an easy sale.

To maximize price and streamline the selling process a business seller should follow my ACTIONä plan. Follow this plan and you will set yourself apart from other sellers. ACTIONä stands for:

Arrange all the affairs of the company

Coach and counsel the company. Its people, process and systems

 Transmit and teach all the good “things” about your firm (and those “things” are)

Intricacies that make your company special

Operations and management systems in place that will make a transition smooth

Numbers, all the financials in understandable form, straightforward with no “tricks”

For now, let’s cover transmitting, which means presenting the company. A buyer must see the company for what it is. Nothing more, nothing less. Present the potential, but have supporting research. Potential is the word most overused by business sellers.

Next, the basics of presenting your company to a buyer. First, cover the obvious things like sales, profits, product or service, industry, etc. Emphasize the little things that most sellers forget about. Often these are the non-financial factors, customers, employees, the lease, supplier relationships, marketing and competition. Go into detail, without giving away any trade secrets. Astute buyers will notice this. Remember when buyers have to dig for information they always wonder why the information was so hard to get and what else could be hiding.

Here’s some blatant examples of errors I’ve seen in the presentation of businesses.

“The company doesn’t have any [serious] competition.” Right, let’s get serious. There is always competition and if there isn’t maybe it’s because the industry is dying.

“The employees have a loyalty to the company that is hard to match.” I recently saw this comment in the prospectus of a business where the most senior employee has less than three years tenure. Perhaps “hard to match” means they don’t stay very long.

“Gross profit margins have been stable even with the sales growth.” This statement accompanied financial statements showing a 15% decrease in gross margin over the past two years. If nothing else, be accurate.

“The company does little or no marketing. The owner feels there is the potential to double business with a little marketing.” Then why didn’t the seller do some marketing so he could tell the buyer what works and what doesn’t work. Of course, the seller expects the buyer to pay for this potential.

“The owners are motivated to sell because they want to retire.” Sounds great, except in this case the owners were in their 30’s, wanted all cash and a price about twice what the business was worth. I’d be motivated too!

Keep it realistic, avoid hyperbole and you will move ahead much faster. The seller must live with the buyer after the sale, so present everything with integrity.