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.