08 Apr Mission: Sell a Business for Absolute Maximum Sale Price
Selling a business is a sales process. The business sale price ultimately received for a business is greatly impacted by HOW the business is sold. Maximum business sale price is garnered through appropriate preparation of the offering documents (packaging); savvy execution of the proven “quiet auction” process; and deft negotiation and orchestration of the process by an experienced and talented dealmaker.
Selling a business is a sales endeavor, one that’s quite involved, at least when the mission is absolute maximum sale price.
The sale of a business is not like the sale of a house or car. Houses and cars exist in great quantities and are sold based on comparable sales data. Businesses are fewer in number and each is unique. There are no comparable sales data.
And here’s the good news for owners of businesses with more than $1 million in annual profit: Buyers are numerous, have plenty of money, will travel, and are prone to let their considerable egos influence their decision.
Yes, selling a quality business that’s well established, profitable, growing, and has a proven management team, is more like selling a fine work of art or representing a professional athlete. Packaging, process and dealmaker skill can add significantly to the sale price.
Think of your business as the fuselage of a rocket ship. It has value. It’s been carefully constructed at considerable time and expense. It can carry people into space and contains all the equipment and technology necessary for outer-space flight. But just as a rocket cannot fly without engines, a business cannot be sold without packaging, process and dealmaker skill. At least not successfully.
A business has intrinsic value. Book value, if you will. Dealmakers, private equity groups and venture capitalists call it Enterprise Value. Keeping with our rocket ship analogy, Enterprise Value is the value of the ship without its rockets. It has value as it sits on the launching pad but it’s not going anywhere. For this reason, its value is considerably diminished.
Business owners who try to sell their business without preparing a professional package, or by waiting for buyers to knock on their door, find themselves sitting in their fuselage without engines. No thrust. No movement toward an exciting destination.
Much more than simply wrapping up the information and adding some pictures, business buyers want to see certain things. See certain data presented in a certain way. So experienced sell-side M&A advisors craft their packages accordingly.
Experienced, serial buyers of midsize businesses value their time to an incredibly high degree. So, they’ll tend to buy – and pay more for – businesses that are packaged and represented in a professional and orderly manner. This is especially true with private equity group buyers. They are not content buying a business. They want to buy many businesses. Many each year. They want to close a deal and move on to the next. To them, packaging and process matters and they will pay for it – in the form of a higher sale price. Even so, the information they want and need is extensive. Skilled sell-side advisors know what information buyers want and how they like it packaged.
Finally, with respect to packaging, is the ability to provide the data to many buyers simultaneously. Maximum value comes from working many high-quality buyers simultaneously. The packaging must accommodate this.
In concept, the process that maximizes sale price is simple. Identify the best buyers in the world for the particular business and then work them against each other, simultaneously. It takes a lot of work, time, energy, communication, experience and skill. The results, when done right, are literally golden.
Shocking as it may be, buyers don’t like to be “worked.” They like to call the shots. Get things their way. If someone is getting worked, they like to be the one doing it.
Most experienced buyers of midsize companies are smart and confident. Strong personalities as well. They don’t like to simply be run through an auction process where the highest bidder wins, so here’s where the dealmaker skill comes in.
What does this mean for you, the prospective business seller who desires absolute maximum sale price? Secure the representation that can maneuver in this environment and win. Pick well and you can literally see magic at work. But hire a dud, and your rockets stall and you land in the sea.
In summary, a business is like the fuselage of a rocket ship. It has value sitting on the launch pad but won’t make progress toward its mission of maximum sale price without the powerful triple engines of packaging, process and dealmaker skill. So if you have a proven, profitable business with more than $1 million in annual profit and you wish to sell for the absolute maximum, find an M&A firm that knows how to maximize sale price. That can power your journey to maximum sale price through skilled and savvy packaging, process and dealmaker skill.