Our firm has recently experienced a flurry of business owners considering the possibility of selling and many are already going down the path with a key employee or other interested party. Experience has shown us that although this appears to be a straightforward solution, especially for owners looking to retire, there are many different obstacles in the process that sellers learn about the hard way by trying to do it alone.
Many dream of owning their own business but when the acquisition process begins, frequently end up backing off when they realize the risks involved in a business owner’s role. We often hear from owners with a certain employee or family member who would be perfect as the new owner, but this is often wishful thinking. In our experience, the most important concerns for business owners are their existing employee and client relationships which makes it vital to find the “right person” to take over in their absence. This is where staying objective is important. The “known buyer” may have the right level of experience or mindset for the job but they may not have the financial capability and ability to tolerate the risks of business ownership. Involvement with a firm like ours in the buyer qualification process allows the seller to be more objective. If the employee or family member turns out to be the right fit, then this process will further confirm them as the right buyer and make the ownership transition even more efficient. It may be as simple as finding alternative financing sources for the buyer or asking some of the hard questions up front (especially if there’s a long-time relationship already in place) to ensure the buyer is prepared to move forward.
Far too often owners approach our firm after being at a standstill with their potential buyer for months or even years. In many cases, because of the lost time and atrophy in the process, other viable options have become very limited and the business value has substantially eroded. By hiring a professional firm for the task of selling the business, the process of preparing the business and taking it to market often pays for itself many times over. Furthermore, this expertise can help maximize the perceived value and maintain value even when the market fluctuates, or unforeseen internal changes occur. For example, a business owner with over 70 employees had attempted to sell a few times to both an employee and industry buyers prior to signing on with our firm this past year. When another potential buyer approached him, this time he fully understood the risks and level of effort required to sell his business so he agreed to go through the process of preparing the business for sale to help ensure he kept his options open. The buyer he had identified turned out to be a good fit but they still needed help in the process which allowed the owner to stay focused on his business. The deal closed in a matter of months at a value much higher than the previous offers the owner had received while trying to sell on his own.
While it is tempting for a business owner to try selling on their own, hiring a experienced M&A firm is critical to maximize the value of the sale and help ensure a successful ownership transition. The opportunity cost for an owner trying to sell to one or even a few buyers as a “side gig” is just not worth the perilous risks. The majority of our business comes from referrals and we appreciate your continued trust in our firm.
Robert W. Amerine
President, CBI, M&AMI