Why Selling Your Business is Not Like Selling Your Products or Services

Why Selling Your Business is Not Like Selling Your Products or Services

Matt Gilbert

October 31, 2019

Most business owners have years of experience selling their products and services. So the logical conclusion many draw is that selling a business must not be much different. After all, a sale is a sale, isn’t it? Selling a business is basically like negotiating the sale of a product or service, just on a larger scale. Right?

Wrong! You might be a master salesperson when it comes to your business’s offerings, but actually selling the business that sells those things is an entirely different undertaking and should be viewed as ONE of, if not THE, most complex endeavours you’ll ever tackle in your business life. No joke! To find common ground with your potential acquirers (meaning understanding their deep motivations for wanting to buy a business like yours), you must know how to position an imperfect business as a must-have, once-in-a-lifetime opportunity in a noisy market that is competing for their attention. You must also be able to educate potential acquirers as to why buying your business - over every other investment decision they can make - is the best decision for them at this time. 

Some of the same selling techniques work well such as (1) building a defensible value proposition capable of withstanding professional scrutiny, (2) identifying/anticipating objections and working to dissipate their impact long before a prospect even knows about them, and (3) adopting strategies to move closer to a commitment and funds transfer. But the significant differences in selling techniques - and the financial weight of these differences - massively outweigh the similarities. There are at least three key distinctions we can discuss briefly here: 

  1. You’re not just a seller; you’re also a buyer. When you sell a product, it doesn’t matter if the buyer uses your product the way you intend. It only matters that they purchase the product and are satisfied. However, when you sell your business, you must vet the buyer. Can he run the business without running it into the ground? Does she have financial and business acumen, a decent reputation, access to capital, the ability to win the trust of your team, and a plan for the company’s future? Most owners have no clue how to properly vet a buyer and can get into a serious mess trying to transact with the wrong party.
  2. When you sell your business, there’s only one item up for sale. The goal isn’t to find as many buyers as possible and then sell to them based on their variety of goals and motives. Instead, you need to create a competitive bidding landscape that opens access to and ushers in the best possible buyer. And unlike with traditional sales, you have to do all of this while limiting access to sensitive business information, keeping confidentiality, and continuing to run your business in a way that makes a compelling proposition for purchasing it. 
  3. There’s a massive diligence project to undertake. Traditional sales pitches don’t demand unbridled honesty or detailed disclosures of your weaknesses. However, when you sell a business, you have to put everything on the table - even the things that make the business less appealing. This means you must come up with a workable sales strategy that leaves nothing out, get the timing just right, and then package all of that in an attractive, forward-looking pitch that doesn’t expose you to excessive liability or lofty unachievable expectations. 

Selling a business often requires years of preparation. There‘s a lot you can do to increase value and avoid diligence-related embarrassment, but only if you recruit the right M&A advisory team early enough in the process to make a difference and impact closability. A skilled and experienced team of M&A advisors will help you throughout the entire process and ensure that you are making the best decisions. 

This means you have to know enough to know what you don’t know. And for most owners, that means understanding that you probably don’t know enough to sell your business for top dollar on your own while limiting your exposure to deal-related mishaps, a talent exodus, and undue future liability. Your hard-won sales acumen will certainly be useful as you navigate this process. On its own though, it’s not adequate. Professional buyers and their hired-gun accounting/business consultant and legal teams will outwit you at nearly every turn. We suggest you protect yourself and give your business transfer the highest possible chance of success by investing in the best help you can hire. It all starts  by consulting an M&A sell-side specialist to help you identify the best strategy for achieving your goals. 

About GaP Business Advisors

Gilbert & Pardue Business Advisors (GaP) is a Houston-based business advisory firm serving  lower middle and middle market 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 and middle market businesses – those businesses generally enjoying annual revenue of $5-$50 million – with the quality of M&A representation and value-enhancement services previously only available to middle, 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 market provides the quality of representation and transactional expertise that we do.

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