Acquisition Advisors | Why Do Many Business Sellers Forget the Basic Economics of Supply and Demand?
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04 Feb Why Do Many Business Sellers Forget the Basic Economics of Supply and Demand?

Why Do Many Business Sellers Forget the Basic Economics of Supply and Demand?

Every business seller wants a high price, right? Of course. Most want the absolute highest price possible. Sure can’t blame ‘em, I would, too.

I love helping business sellers get that crazy high price. It’s exhilarating to me (and profitable).

So, what is it that drives price up? Yes, the answer is simple — demand.

If you want to sell for a high price, what do you need? Demand. That is, lots of buyers. Lots of eager buyers with motivation and money.

So why is it that many business owners decide to do it themselves and negotiate with just any buyer who contacts them? Or contact a single buyer and try to work out a deal. Rarely does this work, and even when a deal gets done, how do sellers know they received a top price? In almost every case, they did not. The buyer just did not have the pressure necessary to extract the absolute maximum price.

Some business sellers have the notion that they can get the important job of securing a high price done right by doing it themselves. But the reality is that there is no way they can accomplish this. They don’t have the time, energy, buyer contacts or ability to be hard-and-fast* like an M&A advisor.

Does this make sense?

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*This is because the seller wants and needs the buyer(s) to like him. There’s a tremendous amount of pressure on the seller to be “nice.” To be accommodating. Great deals aren’t done this way. The seller needs a bad guy, a sidekick who says, “SHOW US THE MONEY!”

3 Comments
  • Roger Hull
    Posted at 16:06h, 09 February Reply

    I just logged on to your Blog and found the topics interesting. The first little article I read on “Why Do Many Business Sellers Forget The Basic Economics of Supply and Demand” is so right on. We have purchased three small companies and three out of the four were fine but we would have been wise to use a 3rd party M&A Expert on the fourth. We will be looking at our exit strategies and opportunities when the economy recovers and will definitely use an M&A Company to find buyers and negotiate for us.

  • T. Cooper
    Posted at 08:47h, 10 February Reply

    Very true. This also true for any buying or selling process.

  • dperkins@acquisitionadvisors.com
    Posted at 11:14h, 10 February Reply

    Mr. Hull, I’m encouraged that you find value in the content. Thank you for your comments.

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