Leadership

How to find the right buyer for your company

Written by Corinna vanGerwen

Is retirement starting to look good? Or maybe you just want to get into something different. Whatever the case, when you own a business, leaving your job isn’t as easy as giving two weeks’ notice.

For years you’ve built your business and nurtured it from the ground up, so you don’t want to see it just die when you move on. Consequently, you’ve prepared your business for sale — working the numbers with your accountant to ensure everything is in order, having it appraised to determine your asking price, preparing documents and systems so everything continues to run smoothly through the transfer — and now you need to find the perfect buyer.

Don’t go at it alone

Most entrepreneurs only sell a business once, so their ability to make a good deal probably isn’t as developed as buyers who have gone through the process many times. By hiring a business broker or a mergers and acquisitions specialist to act as intermediary, not only do you get expertise, but his or her presence during the sale process also signals your potential buyers that you mean business. An advisor’s objective eyes will ensure you’re getting the best deal and steer you through the process. Locate a specialist by asking other entrepreneurs or consultants that you know, or contact the Canadian Association of Management Consultants

Make a list of potential buyers

Work with your expert to put together a list of those who may be interested in purchasing your company. You could do this alone, but your intermediary will have numerous contacts and possible buyers, says Brian Keough, vice president of Halifax-based Corporate Navigators. “The key purpose of an intermediary,” says Keough, “is to create a market for your company.” But you can add to that list your own industry contacts, business partners, key personnel and competitors — anyone who may be interested in filling your shoes.

Get the word out

Letting people know that your company is up for sale takes a little more tact than buying an ad in the newspaper. Toronto-based Bob “The Coach” Coffey, a 30-year mergers and acquisitions veteran, warns that if the word becomes too widespread, clients and employees may start jumping ship — and with them go some of your company’s major assets. Work with your advisor to create what Coffey refers to as a “teaser document,” in which you highlight the benefits of your company instead of its features. Your advisor can lure potential clients with this marketing tool then divulge more specific information to those who show serious interest. Ideally, says Keough, you’ll receive nibbles from a number of interested parties, which will give you leverage when negotiating a price.

Know your buyers

Once you start generating interest, you’ll need to know whom you’re dealing with. Although you’ve already had your company appraised to determine your asking price, the amount buyers are willing to pay differs based on what they’re expecting to gain from acquiring your business.

There are several different types of buyers, says Keough. On one end of the spectrum is the strategic or special purpose buyer — this is the type of buyer you should hope for, because he’ll pay the most for your firm. The strategic buyer can earn more from your company than others, because he’ll use your company to serve a larger purpose. For example, perhaps by buying your firm, he’s eliminating the competition. Or maybe you’re a distributor and he needs a distribution platform for his product.

On the other end of the spectrum is the ordinary or general buyer, often a family member or an employee. He will step into the role of owner and operator without making many changes at first and without a larger purpose. He’s buying himself a job.

Somewhere in between these two types is the financial buyer. This buyer will have a specific financial interest: perhaps he’s consolidating a bunch of smaller companies in a fragmented industry; maybe he wants to go public. Regardless, he’ll want a close look at your company’s financial performance and his goal will be to increase revenues.

Keep your eye on the ball

Even though you may have the deal all wrapped up, that you’ve found the perfect buyer, it’s not done till everyone has signed on the dotted line. There are many things that may derail your deal: your business’ performance goes downhill, word of the sale leaks out, or the market just changes. So keep in mind, that to get that perfect buyer, you have to perform right to the last moment.

Read other pointers on How To contribute to your business success!

© 2004 Corinna vanGerwen

Originally appeared on PROFITguide.com
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