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November 3rd 2010

How should your business be sold? Should you appoint someone who will advertise your business widely and send outline details to hundreds of companies?

You could appoint someone to advertise your business for sale on their website and to write to hundreds of companies in your sector, taking the view that the more they write to, the more interest they will generate. They may generate a lot of interest but you are unlikely to get the best deal from this approach. Their efforts and your efforts are diluted across many interested parties rather than being concentrated on those potential purchasers that are most likely to put a good offer “on the table”.

I think it’s useful to start by thinking about what you wish to achieve through the sales process. Who do you want to buy your business? The answer is usually someone:

• Who has a strategic reason for buying and is therefore willing to pay a good price
• Who can fund the acquisition through their own resources or is almost certain to receive the full support of their funders

• Who understands the acquisition process, preferably with a track record of previous acquisitions, and who is unlikely to pull out before completion

  If these are the qualities required then why use the “scattergun approach” of contacting potential purchasers who do not have these qualities?

  It’s easy to get interest in any business, but you don’t want:

• Time wasters
• Those who believe that they can reduce their first offer at a later stage in the process

• Those who are unlikely to be able to afford the acquisition from their own resources and are unlikely to be able to raise the funding necessary

  There are confidentiality issues as well. Do you want your customers and staff to find out you are selling? Efforts are made to protect confidentiality (including the fact you are selling) through the use of non disclosure agreements but the more people that are approached, the higher the risk of this information leaking out. A targeted approach rather than the much higher volume scattergun approach reduces the risks here.

  The scattergun approach is the lazy option and is virtually never appropriate. You can only sell your business once, so do it the right way.

  So what is the right way? I will discuss this in my next blog.

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