The following is the thoughts and analysis of Frank Williamson, CEO of Oaklyn Consulting, a consultancy firm that assists private companies and nonprofits with sales, mergers, acquisitions, and fundraising. capital, investor relations, succession and other strategic corporate finance. the decisions.
Anyone who has built a business from scratch knows it’s a constant learning process, but over time you get better. After climbing that mountain, however, entrepreneurs can feel like they’re back to square one when it comes time to sell their business.
The world of M&A can seem more sophisticated and have higher stakes than most business owners are used to. But deep down, mergers and acquisitions are about sales, something every entrepreneur has experience in. So the first step in selling a business is to change your mindset – to start seeing your business as the product to sell, rather than who you are. do or do.
As an investment banker, I often work with entrepreneurs to sell their businesses and create succession plans. I have found that one of the biggest predictors of a smooth and successful sale is when the business owner takes an active and collaborative role in the process. Not only can they be an invaluable source of information about the inner workings of the business and its industry as a whole, but they can also serve as the most effective evangelist for their business to potential prospects.
Here are some ways the owner / CEO can contribute to the successful sale of the business:
- To be able to talk about the future of the company.
The most important way for a CEO to contribute to the sales process is to have a clear and plausible view of what happens after the sale and to be able to clearly communicate this story to potential buyers or investors. A leader is usually used to listening to people talk about their needs and finding a solution. Such a person will also be ready to have a nuanced conversation with prospects about the specific benefits of the business combination. They will be able to describe how the business was built to withstand a change in ownership, as well as how it is expected to cope with future changes in its industry. Bringing in this specific level of knowledge will go a long way in helping potential buyers overcome their hesitations.
- Build a pipeline of realistic prospects.
My belief is that when business owners / CEOs are also good networkers, they win at the game of selling businesses. They are the ones who know their industry – their customers, suppliers, influencers and competitors. They might even be on good terms with some of those competitors or have spoken casually about what a combination of their businesses might look like.
When an entrepreneur begins to seriously think about who to sell their business to, those years of networking conversations can really pay off. They will have an imaginative view of who their most realistic outlook is, and they will have personal connections made with people from whom they can begin to build.
- Bring good selling habits to the bargaining table.
One big mistake business owners tend to make when motivated by inheritance is that they look for a single deal opportunity to the exclusion of everything else. When that prospect doesn’t work, they end up starting from scratch with a new prospect – which might collapse at some point as well. It can be an exhausting process that ultimately leads to despair.
The reality is that even for serious buyers, various obstacles can prevent a deal from crossing the finish line. But luckily, most entrepreneurs have a well-established skill in their back pocket that they can tap into: they know how to sell things. And the process of selling a business is like selling anything else. You build a pipeline of leads, chat with several at a time, and continually track the likelihood of a deal with each.
When it comes to the first few conversations, be structured enough that you can move on to other alternatives if people say no. As your conversations get more serious, continue to visit these other prospects so you get a clear idea of your options. Being able to walk away from the negotiating table is the most powerful tool you have to make sure you get the best deal possible.
The limits of a CEO
Despite the talents that a business owner brings to selling a business, the process is usually not something that a person manages on their own. There is simply too much to do and it can be difficult to find time around the normal responsibilities of running a business.
Additionally, a business owner may have other reservations about starting the sales process. Some might not know what the future holds or whether they wish to continue playing a role in the business by working for the new owner. Others might not want it to be known that their business is for sale, although this level of secrecy seems peculiar to people who have reached retirement age – it would be stranger at this point if an owner does not have have a sales plan.
To resolve these and other questions related to a business sale, it is customary to seek an investment banking professional who is familiar with the merger and acquisition process and can act as a sounding board. By combining this advice with their own abilities, business owners can help define the terms of a sale that allows them the next chapter of their choice.