When you’ve decided to sell your business, the magnitude of the transaction might suggest that you shop around and compare offers from multiple buyers. But what if we told you that the first buyer who comes to you could very well be the one? It’s true.
To be clear, we’re not talking about an unsolicited offer out of the blue. We mean your first serious buyer responding to your business listing. Don’t take this person for granted. Need a cautionary tale? We recently saw an owner pass up an offer over $1 million because they believed their business was worth more. Fair market value is what the market will pay for your business, and many times, it’s less than you want. Unfortunately, this owner kept the business on the market, only to eventually sell to another buyer for less than $300k. How could this happen?
It’s tough to get back to running your business emphatically once you’ve entered the exit mindset—even more so if you’ve seen a deal slip away. In most cases, the business will decline because the owner’s heart simply isn’t in it.
Sure, you can still will your way through the same 60-hour weeks when your livelihood depends on it, but that time might not be as productive or imaginative as it was when you were fully invested in the business. Keeping an owner focused on running their business while it’s for sale is one of our biggest challenges when it comes to selling. Picture the bliss of being on a tropical island after your exit. Now, picture being on the plane to that destination and receiving a call that you actually have to turn around and go back to work for the foreseeable future. No matter how much you love what you do, it’s a letdown.
The time to sell a business is when it’s growing and thriving. Even if the business doesn’t necessarily drop off, flat growth can be damaging, too. And the longer the business plateaus, the less impressive its performance appears. Plus, you now become more vulnerable to other factors, such as the economy or losing a key customer, that could reduce your sale price. Growth is strength, and a strong business is much easier to sell.
Selling a business requires significant time and energy. Don’t salt away a solid offer before asking yourself if you’re truly willing and ready to go through the entire process again, including finding a new buyer in the first place. Too often, we see greed get in the way of a good offer; the owner will change their mind and blame the price. To quote our previous article on burnout and your business sale:
“Get up for one last challenge and help keep things running smoothly. If you move slowly through the process while running your business at half speed, the business may look very different to a buyer when it comes time to put pen to paper.”
This excerpt also reiterates our previous two points on mojo and stagnation. You want to sell while both you and the business are at peak performance.
When a new home hits the market, it’s hot. If it’s still on the market months later, it’s not. The same goes in business listings. Buyers will naturally ask if anyone else has been interested. Now, not only did you lose your first buyer, but you also have to explain to your second buyer what happened with the first. The deal you turned down becomes baggage, raising additional questions from every potential buyer going forward.
Make no mistake; there are certainly times when it’s best to walk away from a sale. Maybe the sale price is dropping before your eyes, the terms aren’t ideal, or it’s just not a match. If you are adamant and have a good reason for killing a deal, by all means, do it. Just don’t let a willing and able buyer slip away because you’re being difficult or indecisive. Let Exit Consulting Group help you make sound decisions for a successful sale. Learn more.