Halloween is just around the corner, so we turn our attention to “ghoulies and ghosties and long-legged beasties and things that go bump in the night.” Here’s how to know if your prospective buyer is a trick or a treat.
Tricks
Some of the worst tricks come from zombie buyers. If you get an unsolicited offer for your business, it’s most likely not serious. I’ve seen plenty of phishing attempts that claim to include an offer to buy in a suspect attachment. Like other email scams, bad actors are working at being just credible enough that you’ll click on a link or open a document that can load malware onto your system or start a ransomware attack.
Even if the unsolicited offer comes from a legitimate prospect, the email has probably gone out to dozens of other companies. These predatory buyers are hoping for a response from an owner who hasn’t really thought about selling and certainly hasn’t done any preparation in advance.
The prospect is hoping to initiate what feels like a friendship with the owner and to persuade them to enter a deal that doesn’t include “outsiders” (like business intermediaries.) They’ll often create an illusion of a one-on-one relationship by taking the owner to lunch, being agreeable with many of the seller’s requests, etc. Some will even go so far as to suggest the seller won’t need an advisor on their team since that would be a “waste of money.” Do you really believe their primary motivation is to save the Seller some money? Once you’ve signed the Letter of Intent and have committed to an exclusive deal, the mask comes off. Now, it’s the seller against an army of professionals who will make sure the deal benefits the buyer; it rarely turns out well for the seller.
Buyers are also being duped by professionals who sell them books and workshops and convince them they can buy a business using other people’s money. Sometimes, these buyers even masquerade as private equity firms, or groups that have buying power and experience. It can turn out to be a big waste of time and energy for an unsuspecting seller.
Treats
Owners have the right to choose who they sell their company to, but only if there’s more than one offer. No matter how good an offer looks on paper, the only way to know if it’s the best offer you can get is to test the market. A business intermediary can make sure more qualified buyers have the opportunity to see your business and have a chance to make their best offer. The best way to ensure you end up with the optimal sale is by having an experienced intermediary run a competitive auction-like process so you leave no stone unturned. After all, your business is likely your largest asset, and this sale needs to be handled like the most important sale of your life, because it is!
The “best” offer is dependent on the seller’s goals. Whether it’s about the highest sale price, the best terms, the opportunity to exit the business quickly, or the intent to take care of the company’s workers and its legacy, only the seller can decide which buyer is the best fit. One man’s Snickers is another man’s stale candy corn.
The best treat is a buyer who is interested in adding value to the company rather than solely focused on what they can get out of it for themselves. You’re hoping for someone with industry experience, the ability to manage the company well, and the vision to help it grow and prosper.
You’ll be able to see a buyer’s character during the negotiation process. Trust is the most important aspect of any deal; if you don’t feel good about doing business with the buyer, chances are your employees and customers won’t either.
If you’ve received an inquiry about selling your business, your first step should be to consult a business broker. It’s their job to help you understand the complex process of negotiating a sale and help you avoid costly pitfalls and less-than-serious buyers who will waste your time on a deal that may never happen. A broker will protect your interests and help you find other qualified buyers so you can be sure you’re getting full value for your business.
If I can help you figure out if you’re being treated or tricked, feel free to reach me at 562-761-4689.
