Over the past few weeks, I’ve met with four different business owners who have all said, “I receive multiple phone calls, e-mails, and letters monthly from people interested in buying my company. What should I do?”
While it’s flattering to receive unsolicited interest from potential buyers looking to buy your business, it’s important to understand that pursuing these leads is rarely in YOUR best interests. Despite the allure of a “ready-made” buyer with cash in hand knocking on your door, as a business owner, you need to approach these interactions wisely and with a healthy dose of skepticism.
Why? A buyer’s goal is to find a good deal! And if they can engage you in a singular negotiation without the benefit of a team of professionals to represent you, it usually puts the buyer in a position of control. This way they can request whatever information they want, determine what they see as the fair value of your business, set the structure and terms of the deal, and drive the timeline for closing the deal. In these situations, you are locked into that one buyer and, if all goes south, you have no fallback position.
On the other hand, you, as the seller, want to control the process. The best way to do this is to engage a team of professionals – an M&A attorney, broker or investment banker, CPA, and Certified Exit Planning Advisor. This team can create a competitive buying situation, share information that has been reviewed, and present the business in the best possible light without sharing sensitive information too early in the process.
You, along with your team, set the internal range of value prior to going to market. In addition, you have professionals guide you through the process from start to finish to ensure that your goals are achieved, and the timeline is tightly managed. Also, by obtaining multiple buyers you have alternatives should one fall through.
Let’s go back to the original question: ”What should I do about the unsolicited inquiries I’m receiving on a regular basis?”
First, if you have no interest in selling, ignore the solicitation. Again, it can be very flattering to receive multiple unsolicited inquiries for your business. However, if you’re not ready to sell, this can be a huge distraction. Don’t spend time on them! Instead, this is the time to engage a Certified Exit Planning Advisor to focus on increasing the value of your business and planning for your personal and financial exit.
Second, if you are curious about the potential buyer for a future exit, even if you’re not looking to sell right now, you can ask some general questions to begin qualifying the buyer:
What role or position do you have within your company?
What does your company do and how does this relate to my company?
What factors specifically drive your interest in acquiring my company?
What are your anticipated outcomes or goals with this acquisition?
Have you been involved in comparable acquisition transactions in the past?
The fact that you are asking these questions will probably catch the caller or e-mailer off guard. However, their willingness to answer will give you a good signal about whether they are a candidate to acquire your company.
They will likely ask you questions, as well. Be sure to keep the information very general around products, services, and markets, and don’t provide any specific information that isn’t already easily accessible to them through public sources. Absolutely do not share financial information! They will want to get access to that information and may indicate they are willing to sign a non-disclosure agreement to do so. But don’t give in. You can let them know that you will contact them when the company is for sale. Keep this information in a file for future reference.
I had a past client who was so anxious to sell that he responded to unsolicited inquiries and ended up sharing all his financial information with a buyer - who happened to be a competitor. He had the prospective buyer sign a non-disclosure agreement; however, he managed the process himself. The deal went nowhere, and his competitor ended up with all his information, including customer data. This is a great example of how going it alone without managing the risks can be extremely detrimental.
As a business owner, you have achieved success in your business/industry. However, you have likely never sold a business. When you receive solicitations, remember, these are in most cases professional buyers. They know what they’re doing!
Preparing yourself and your business for exit is a proactive step you should be taking now. It’s never too early to start planning! You never know when the time is right – based on your terms, or due to the unexpected - but you can know that you and your business are ready, regardless of timing, when you’ve carefully planned and prepared.
Reach out to our team to get started on your Value Journey! (920) 770-4141 or info@journeyconsult.com.
Jayne McQuillan, CPA, MBA, Certified Exit Planning Advisor (CEPA) is the owner of Journey Consulting, LLC and author of the bestseller, "The Value Journey: How to Drive Profits, Build Wealth, and Exit Your Business on Your Own Terms."
Our firm is focused on providing business owners and their businesses with strategic planning, exit planning, financial expertise, and organizational improvement. We use a holistic approach within all of our services by aligning leadership with business strategy and outcomes.
Schedule your complimentary consultation to begin your Value Journey today!