April 27, 2021
Let us discuss the various ways a business intermediary might market your business for sale. They will typically:
· List it for sale on MLS websites
· List it for sale in relevant trade association classifieds
· List it for sale on their website
· List it for sale on broker association sites
· List it for sale on business journal and news websites
· Publicize it at trade shows
· Blast it to contacts in their rolodex
What do all these marketing methods have in common? For starters, they are passive! Anyone can post a listing and wait for the phone to ring. Next, they are very public! Marketing through these channels provides no controls over who sees the business is for sale and who does not. And finally, control of timing - a critical component of effectively marketing a business for sale - is lost. Intermediaries who rely primarily on these channels not only have no control over who sees the business is for sale but also have no control over when those prospects might respond. This leads to the risk of having the listing go stale before the best suitors hear of it and reach out to inquire. This risk is a massive threat to ultimate success.
Business brokers and intermediaries who rely on these marketing methods routinely boast about the size of their database, their potential buyer pool, their pre-qualified interested individuals, their registered professional buyers, etc. as a smoke screen to draw attention away from their processes. The truth is their processes rely heavily on prospective buyers “happening upon” the listing and making the first move to inquire about it. You have heard the saying “even a broken clock is right twice a day.” This reliance on luck “to have the right buyer come along” is why they need so many seller listings. I even had a broker tell me once that “with enough inventory making the phone ring, eventually one will sell.” Is that the process you want used to manage the largest sale of your life?
Indulge me for a moment and let us re-imagine the approach to selling a lower middle market ($5M-$75M revenue) business and see if there is a better way. Do you have salespeople? Most businesses do (even if it is you). Having sales staff is a proactive aspect of any effective go-to-market strategy. Salespeople exist to locate and engage prospective buyers to make sure those who need, want, or consume what you have to offer are aware of your offering. Would your business prosper if you only posted classified or MLS listings and hoped prospective customers found you and took the initiative to come to you? It is not likely. So, why would you sign up to have the biggest, most important transaction of your life managed this way? The bottom line is – you should not!
Our competitors are established business brokers and intermediaries. The unspoken secret of their traditional business models – a secret they often do not even realize themselves because “this is how they’ve always done it” – is that those business models are designed to serve them best – not you. Their marketing processes are designed to facilitate “activity” for as many sellers and prospective sellers as possible with as little attention and effort on their part as possible. Of course, they will not tell you that, but it is the truth. Just ask how many “active listings” they have, how many “prospective sellers” they are courting, and what is their quota or goal for signing up new sellers. You will find, if they are truthful, that their business model (the business model of “signing up sellers”) puts the odds of being successful in their favor. (It is a numbers game to them.) This “success” to them comes at the expense that any single client will be an individual success. (Your sale is critical to your success but not to theirs.) You need a transaction advisor who can only be successful if you are successful – that’s authentic alignment!
Fortunately, we at GaP have adopted a process that increases your odds of success. For decades, M&A “professionals” said this way is “too hands-on,” “too intense,” and “too expensive” for businesses in the lower middle market. But we have debunked that theory by adopting each individual client’s goals as our own and aligning our interests with these clients’ interests in our engagements. When comparing traditional odds of a successful sale/close (which are typically less than 20%) to our proven track record of success (which is greater than 90%), we ask: How can you afford not to market a business for sale using “the GaP method”?
How do we do it? Simple. We do it like you would do it. We dissect your business to understand its strengths, weaknesses, and neutral attributes. Then we scour the marketplace to identify prospective buyers who have synergies with your business. Maybe they need the strengths of your company. Maybe they are masters at the very thing holding your company back. Possibly it is a geographical play. There are myriad reasons why your business might be “the answer” to their needs. The point is, if we can articulate “why and how” our client’s business will meet a prospective buyer’s stated goals, we are fulfilling a need when we offer them the opportunity to acquire your business.
We always custom craft a potential buyer list consisting of strategic, financial, and other qualified parties who have a compelling reason to consider your acquisition, and we approach them individually with that very proposition. This can be quite an undertaking in cases where we approach hundreds or even more than a thousand qualified, prospective buyers. But isn’t it worth it if this will be your only sale to ever make?
The GaP process involves selling directly to prospective buyers in a highly-controlled “by exclusive invitation only” process. (This maintains confidentiality so that your employees, vendors, customers, and competitors do not find out you are seeking to sell and thereby perhaps damage your business by quitting, getting nervous, or starting rumors.) Our analysts and researchers are masters at business matchmaking, and our process works because we create a time-sensitive, highly-controlled, invitation-only competition for financially capable suitors who are compelled to try and out-bid and out-negotiate one another for the privilege to be your acquirer.
I could write a book about why most traditional M&A processes are counterproductive for most lower middle market business sellers, and we will certainly keep covering issues like this in future blogs. The point of this blog is to implore you to shop around, ask questions, and trust your gut when you go to align yourself with a sell-side transaction advisor. The right advisor will maximize the transaction on your behalf. The wrong advisor will often lose control of the process, costing you plenty and may even cost you the transaction all together. Choose wisely, my friends!
If any of this resonates with you, I would encourage you to take our Sellability Assessment and talk with us to see if your business makes the cut as one who can still command a great exit in this M&A environment. We will be in touch quickly to discuss the results. Click here to take the assessment.
About GaP Business Advisors
Gilbert & Pardue Business Advisors (GaP) is a Houston-based business advisory firm serving lower middle market and middle market business owners from coast to coast through representation for Mergers & Acquisitions (M&A) and through business value-growth services such as Fractional CFO, Advisory Board, Executive Coaching, and Consulting.
Matt Gilbert and Bret Pardue established GaP to provide owners of lower middle market and middle market businesses – those businesses generally enjoying annual revenue of $5-$75 million – with the quality of M&A representation and value-enhancement services previously only available to upper middle and large businesses. GaP brings highly experienced executives, sophisticated financial and marketing products, proven-effective processes, and fully integrated expertise to every engagement. No other M&A firm serving the lower middle and middle markets provides the quality of representation and transactional expertise that we do.