Even if your business is not listed for sale, you may at some point be approached by someone who wants to buy it. Almost a third of all business owners get approached with an unsolicited offer to buy their company at some point. If someone proposed buying your Southwest Florida business today, would you know how to handle it?
At first an unsolicited offer may catch you off guard. You may have thought about selling your business, but not in much detail. The prospective buyer might offer more than you thought it was worth. While your instinct may be to immediately say “yes” to a flattering offer, there are some questions you should ask yourself first. The following questions are a few that you should know the answer to before seriously considering any offer. What is my business really worth? How much are similar businesses selling for? Could I negotiate a more favorable deal? Are there other potential buyers out there? What am I looking to achieve through the sale of my business? Discovering the answers to these questions will shine some additional light on that offer, and help you figure out if it really is a good one or not.
Many business owners like the idea of selling their business on their own. They assume that it is a process they can handle, and save some money by not using an intermediary. Selling on your own is certainly possible, but the process is extremely detailed and time consuming. Many sales take months to complete, and in some cases, more than a year. It is something that can burn out and overwhelm a business owner, even early on. Keep in mind that the person offering to buy your company is likely experienced at buying businesses, and if you are not, they already have leverage over you in negotiations. If the buyer wants to delve deeper into your business to try and figure out how financially stable it is, you also need to know how and when to release this information in order to protect your privacy, the value of your business, and subsequently, its future success.
For the aforementioned reasons all business owners should have proper representation when handling any offers to purchase their business. With something as important as your business, with which you’ve invested countless hours of hard work, you wouldn’t want to make a hasty decision, would you? Do your proper research and due diligence, employing professionals for assistance and sound advice. Accountants can help advise you on tax benefits and other financial matters. A lawyer can make sure that you’re well represented legally. An M & A advisor, such as a business broker, can help you to get a grasp on the true value of your business and how to handle negotiations.
The services of a business broker really have a lot of hidden value in this situation. Even if an unsolicited offer is higher than you would expect, you need to take time to consider it and make sure it favors you and not just the buyer. If you stopped to think about it, would a buyer offer you something that didn’t work in their favor? The business broker can help you to decide if it really is a reasonable offer, or if you could demand more. They can perform a business valuation which takes into account numerous tangible and intangible assets of your business, and takes into consideration market research and the value of similar businesses. From there, the broker can help you to demand the highest possible asking price, and the most favorable terms.
Anyone who is interested in buying your business will want to dig deeper to make sure that they are purchasing something that will work well for them, rather than just go by a hunch. Assuming that you accept their initial offer, they will want to see plenty of documentation to back up their assumption that your business is worth what they are willing to pay for it. This includes cash flow statements, profit & loss statements and customer lists, just to name a few. While a buyer is entitled to this information as part of their due diligence, you need to be able to control the flow of this information, knowing what to release, and when to release it. This is where there is a high potential for making mistakes that could damage your business, especially if your buyer is a competitor. Brokers are experts at confidential business sales, and know how to protect your privacy when releasing important documents relative to your business. Part of this process is making sure all potential buyers are qualified and sign a Non-disclosure Agreement before providing in-depth documentation about the business.
In addition to protecting the privacy of your business, you also need to consider your ability to negotiate a deal that works in your favor. More often than not, unsolicited offers will come from buyers who understand the negotiation process. They will present the offer without going through an intermediary with the hopes that you will accept it and the deal will work out in their favor. If you accept it without consulting with an M & A professional, you may be leaving money on the table. Business brokers do work on commission, and you will have to pay them if your business sells, but the negotiation process is one area where their fee could end up paying for itself. Brokers can help you find hidden value in your business and use it to leverage a better deal.
If you decide to proceed with and offer, or negotiate a better one, you will begin the sale process. Because of all of the intricacies involves with business acquisitions, this will divide your time, and reduce your capacity for running your business. This is another reason why sellers get help from an experienced intermediary, such as a business broker. A broker acts as a buffer between you and the buyer. Their involvement also allows you to continue to run your business. If you want to sell your business for the highest possible price, it wouldn’t make any sense to do anything to jeopardize it, such as spreading yourself too thin. This will not only hurt you in the short-term, but also in the long term, if the business doesn’t end up selling.
Whether you plan on selling your business now, or in the future, you need to be prepared for how to handle an offer. This could be as simple as arming yourself with the knowledge of how much your business is really worth, and having a phone number for a good M & A advisor on hand. If you want to get an accurate market value estimate for your business, contact CIBB today and get one for free, with no obligation or commitment required. We can also help make sure you are well represented if any enticing offers come your way.