When it comes to buying or selling a business, there is no replacement for a solid confidentiality agreement. One of the key ways that business brokers and M&A advisors are able to help buyers and sellers alike is through their extensive knowledge of confidentiality agreements and how best to implement them. In this article, we will provide you with an overview of what you should expect out of your confidentiality agreements.
A confidentiality agreement is a legal agreement that essentially forbids both buyers and sellers, as well as related parties such as agents, from disclosing information regarding the transition. It is a best practice to have a confidentiality agreement in place before discussing the business in any way and especially before divulging key information on the operation of the business or trade secrets.
While a confidentiality agreement can be used to keep the fact that a business is for sale private, that is only a small aspect of what modern confidentiality agreements generally seek to accomplish. Confidentiality agreements are used to ensure that a prospective buyer doesn’t use any proprietary data, knowledge or trade secrets to benefit themselves or other parties.
When creating a confidentiality agreement, it is important to keep several variables in mind, such as what information will be excluded and what information will be disclosed, the term of the confidentiality agreement, the remedy for breach, and the manner in which confidential information will be used and handled.
Any effective confidentiality agreement will contain a variety of key points. Sellers will want their confidentiality agreement to cover a fairly wide array of territory. For example, the confidentiality agreement will state that the potential buyer will not attempt to hire away employees. In general, this and many other details, will have a termination date.
The specifics of how confidentiality is to be maintained should also be included in the confidentiality agreement. Parties should agree to hold conversations in private; this point has become increasingly important due to the use of mobile phones and in particular the use of mobile phones in out-of-office locations. Additionally, it is prudent to specify that principal names should not be used in outside discussions and that a code name should be developed for the name of the proposed merger or acquisition.
Safeguarding documents is another area that should receive considerable attention. Digital files should be password protected. All paperwork should be kept in a safe location and locked away for maximum privacy when not in use.
In their enthusiasm to find a buyer for their business, many sellers have overlooked the confidentiality agreement stage of the process. Most have regretted doing so. A confidentiality agreement can help protect your business’s key information from being exploited during the sales process. Any experienced and capable business broker or M&A advisor will strongly recommend that buyers and sellers always depend on confidentiality agreements to establish information disclosure perimeters.
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The simple fact is that selling your business is likely to be the single most important financial decision you’ll ever make. With this important fact in mind, it is essential that you prepare far in advance. Let’s dive in and take a look at some of the key items you’ll want to check off your list before placing your business on the market.
Think About Legalities
When it comes to selling a business, legal issues should be at the forefront of your thoughts; after all, selling your business does involve the creation and execution of a complex and detailed legal agreement. There are many times in life where it is possible to cut corners, but hiring a good lawyer or law firm is not one of those times. Moreover, you’ll want to settle all litigation, environmental issues or other issues that could potentially derail a sale.
Deal with Serious Buyers
Working with a good business broker or M&A advisor is an essential part of the selling process, as these professionals will help you to weed out “window shoppers” as well as prospective buyers who are simply not a good fit for your business. Any serious buyer should be willing to submit a Letter of Intent. Everyone should be on the same page as far as price and terms as well as what assets and liabilities are to be assumed. This second point reinforces the first point. It is essential to have an experienced lawyer helping you through various aspects of the sales process.
Be Flexible on Price
You should also be prepared to accept a lower price than you might ideally want. There are many reasons that this may occur, ranging from a lack of management depth and a lack of geographical distribution to a dependence on a limited number of clients. Reliance on a small number of customers and/or clients can give potential buyers pause, as it could raise concerns regarding the stability of your business. Addressing these issues years before placing your business on the market can help you best achieve the price point you desire. This is yet another reason to work with a business broker in advance.
Improving Your Chances for Success
In terms of achieving the price that you want for your business, there are other steps you can take. Increasing the visibility and profile of your business is always a savvy move. Consider attending trade shows, boost your online profile via stepping up your social media game and explore creating a coherent public relations program.
Finally, selling a business is often a waiting game. You have to be psychologically prepared to wait a considerable period of time before your business is sold. The fact is that most businesses do indeed sit on the shelf for a considerable period of time before they are sold.
Preparation, patience and good organization will dramatically increase your chances of selling your business and achieving an appropriate price. The sooner you begin organizing your business and working with experienced professionals, the greater the chances of success will be.
The post How to Optimize Your Chances of Selling Your Business appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Most business buyers and sellers are wondering what 2021 and beyond will bring. BizBuySell and BizQuest President Bob House provided a range of insights stemming from BizBuySell’s 3rd Quarter Insight Report and a survey of over 2,300 business owners.
The simple fact is that the pandemic has most definitely had a major impact on the buying and selling of businesses. This fact is obvious. But diving deeper, there are a range of insights that can be gleaned.
First, owners do understand that COVID is a massive force in business right now. According to the survey, 68% of owners feel that they would have received a better price for their business in 2019 than in 2020. Only 37% of respondents felt that they would receive a better price this year. Of owners who felt that they would receive a lower price in 2020 than in 2019, 71% of these owners said that their assessment was directly tied to the pandemic and its accompanying economic impact.
A question on the survey asked owners if the pandemic had impacted their exit plans. 55% responded that the pandemic had not changed their exit plans. Additionally, 22% said that they now planned on exiting later, and 12% stated that they planned on exiting earlier. In short, the majority of business owners were not changing their exit plans.
On the other side of the coin, buyers are acknowledging that the present seems to be a very good time to buy. A staggering 81% of buyers stated that they felt confident that they would be able to find an acceptable price point. In terms of their purchasing timeline, 72% of respondents stated that they were planning on buying a business soon. Survey follow-ups indicated that large numbers of buyers were also planning on buying in 2021.
Generational differences are playing a role as well. Baby Boomers tend to be more optimistic than non-boomers as far as their overall views on the recovery. 43% of Baby Boomers now expect the economy to recover within the next year as compared to just 30% of non-Boomers. House pointed out, “Baby Boomers are the generation that did not plan, which makes it harder for them to adjust transition plans if they were preparing to retire, as small businesses don’t have the infrastructure and management teams in place to wait out a bad cycle.”
Based on the information collected by BizBuySell’s 3rd Quarter Insight Report and their survey, it is clear that there is a new wave of buyers on the horizon. The report supports the notion that the pandemic has made small business ownership an attractive option for new entrepreneurs. Factors driving new entrepreneurs into the marketplace include everything from being unemployed and wanting more control over their own futures to a desire to capitalize on opportunities.
Finally, House notes that 2021 could be a “perfect storm for business sales,” as 10,000 Americans will turn 65 each and every day. This means that the supply of excellent businesses entering the marketplace will likely increase dramatically.
The post Insights from BizBuySell’s 3rd Quarter Insight Report appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
For every reason that a pending sale of a business collapses, there is a positive reason why the sale closed successfully. What does it take for the sale of a business to close successfully? Certainly there are reasons that a sale might not close that are beyond anyone’s control. A fire, for example, the death of a principal, or a natural disaster such as a hurricane or tornado. There might be an environmental problem that the seller was unaware of when he or she decided to sell. Aside from these unplanned catastrophic events, deals abort because of the people involved. Here are a few examples of how a sale closes successfully.
The Buyer and Seller Are in Agreement From the Beginning
In too many cases, the buyer and seller really weren’t in agreement, or didn’t understand the terms of the sale. If an offer to purchase is too vague, or has too many loose ends, the sale can unravel somewhere along the line. However, if prior to the offer to purchase the loose ends are taken care of and the agreement specifically spells out the details of the sale, it has a much better chance to close. This means that a lot of answers and information are supplied prior to the offer and that many of the buyer’s questions are answered before the offer is made. The seller may also have some questions about the buyer’s financial qualifications or his or her ability to operate the business. Again, these concerns should be addressed prior to the offer or, at least, if they are part of it, both sides should understand exactly what needs to be done and when. The key ingredient of the offer to purchase is that both sides completely understand the terms and are comfortable with them. Too many sales fall apart because of a misunderstanding on one side or the other.
The Buyer and Seller Don’t Lose Their Patience
Both sides need to understand that the closing process takes time. There is a myriad of details that must take place for the sale to close successfully, or to close at all. If the parties are using outside advisors, they should make sure that they are deal-oriented. In other words, unless the deal is illegal or unethical, the parties should insist that the deal works. The buyer and seller should understand that the outside advisors work for them and that most decisions concerning the sale are business related and should be decided by the buyer and seller themselves. The buyer and seller should also insist that the outside advisors keep to the scheduled closing date, unless they, not the outside advisors, delay the timing. Prior to engaging the outside advisors, the buyer and seller should make sure that their advisors can work within the schedule. However, the buyer and seller have to also understand that nothing can be done overnight and the closing process does take some time.
No One Likes Surprises
The seller has to be up front about his or her business. Nothing is perfect and buyers understand this. The minuses should be revealed at the outset because sooner or later they will be exposed. For example, the seller should consult with his or her accountant about any tax implications prior to going to market. The same is true for the buyer. If financing is an issue it should be mentioned at the beginning. If all of the concerns and problems are dealt with initially, the closing will be just a technicality.
The Buyer and Seller Must Both Feel Like They Got a Good Deal
If they do, the closing should be a simple matter. If the chemistry works, and everyone understands and accepts the terms of the agreement, and feels that the sale is a win-win, the closing is a mere formality.
The post What Makes a Deal Close? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
The International Business Brokers Association reports that 80% of the businesses listed for sale don’t sell each year. That’s because sellers, like everyone else, make a few classic mistakes that cause them to either get no offers or that cause the deal to fall apart during due diligence. In this article, I’ll explore four of the most common mistakes I’ve seen in my 25 years as a business broker.
1. Incorrect Assumptions about the Value of Their Business
The number one reason most deals fall apart is that sellers don’t understand (or are not willing to accept) the actual value of their business. This causes many business owners to set their asking price too high or turn down reasonable offers when they receive them. Most business owners have put years of blood, sweat, and tears into building their business. Learning that their business isn’t as valuable as they had hoped can be a huge disappointment, but sellers also have to adjust to the realities of what the market will bear.
2. Not Seeing the Business From A Buyer’s Perspective
The second mistake that causes deals to fall apart is that sellers often fail to see their businesses from a buyer’s perspective. One of the best things a seller can do is step back and ask themselves three key questions.
“What information would I want to if I was thinking about buying this business?
“Would I trust the information I’m getting if I was the buyer?”
“What issues about the business give me the greatest cause for concern if I was thinking of buying this business?”
While there are many other questions sellers can ask to help reframe their thinking, these three simple questions can reorient a seller’s thinking, so they understand a buyer’s perspective. Additionally, working with an independent, experienced business broker can help you see your business through the eyes of a potential buyer and can help you avoid a range of problems before you list your business or help you during the negotiation process if these issues pop up later in the process.
3. Neglecting the Business During the Sales Process
Another key mistake many sellers make is to neglect the business during the sales process. This can have significant short-term and long-term consequences. Sellers need to stay focused on day-to-day operations as though the business is still theirs until the deal closes. Buyers will get spooked and either withdraw or lower their offers if the business’s financial results start to suffer during the sales process.
4. Overall Lack of Preparation
The old saying, “You only get one chance to make a good first impression,” applies to selling a business as well. Any business owner who is serious about selling their business will need to invest the time to have all of their documentation available and well organized. It’s important to work with an experienced business broker to understand what information you’ll need and how and when to present this information to the buyer so that it reflects well on you, supports the asking price you are seeking, and protects your privacy and confidentiality in the process. This list would include financial records,
human resource information, marketing statistics, and more. It is important to make a good first impression, so buyers are impressed and believe your business is well organized and well-run. Disorganization, or the inability to promptly produce the requested information, leads prospective buyers to worry that the business isn’t being operated professionally.
Avoiding these seller pitfalls is important if you are serious about selling your business for top dollar. Working with a skilled and experienced business broker/M&A advisor is the best way for sellers to avoid any problems that could derail your deal.
If you are thinking about selling your business, contact Rich Jackim, managing partner of Sports Club Advisors, for a FREE, confidential, no-obligation discussion about your options – 224-513-5142 or firstname.lastname@example.org.
Selling a business isn’t always about the price. It is not like selling a house where the most important factor is finding a buyer who is willing to make the highest offer. In fact, in my 25- years of being a business broker, I’d say that in roughly 20% of the deals, the purchase price was not the most important part of the deal. In the end, sellers are focused on achieving a combination of things, and maximizing the purchase price is only one of them.
Let’s examine some of the other most common goals and objectives sellers have.
- Maintaining the seller’s legacy. For one client, this means getting the buyer to agree to keep the company’s name (which was also the seller’s name) the same after the acquisition and not roll the company into the buyer’s parent company.
- Protecting Employees. For another client, they were the biggest employer in their small town, and the seller wanted to be sure that the buyer would not close down the plant, fire all the employees, and consolidate operations into their plant about 100 miles away.
- Participating in the Upside. Many clients want to remain involved in some fashion (usually in a passive or silent role) with their business after the sale. This often means accepting a lower price at closing but sharing in the company’s future growth going forward. This can be structured in several different ways, including a minority equity interest, a royalty on sales, or an earnout.
- Timing. Several of my former clients had very specific timing goals. In one case, it was due to the owner’s declining health; in another case, the owner’s son and key employee became disabled. In both cases, the owners wanted to sell as quickly as possible before the business suffered, and its value was diminished.
The best way to ensure that you achieve your goals when selling your business is to develop a comprehensive exit strategy before you start the sales process. This assures that everyone on your team is on the same page and is rowing in the same direction.
Rich Jackim, the Managing Partner at Sports Club Advisors, is the author of the best-selling book, “The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners”. He has advised over 200 clients to create their exit plans and helped over 100 clients sell their businesses for a combined value of over $500 million. The book’s success led Rich to create the Exit Planning Institute and created the Certified Exit Planning Advisor (CEPA) program. He has trained over 300 lawyers, accountants, financial advisors, consultants, and business brokers to develop exit plans for their clients.
If you are thinking of selling your business in 2021 or beyond, contact Rich Jackim at 224-513-5142 or email@example.com for a FREE, confidential, no-obligation discussion about your options.
An old saying in negotiating the sale of a business goes like this: The buyer says to the seller, “You name the price, and I get to name the terms.”
Another saying used to explain the actual value of the term full price: “If we could find you a business that nets you $250,000 a year after debt service, and you could buy it for $100 down, would you really care what the full price was?”
It seems that everyone is concerned only about full price. And yet, full price is just part of the equation. If a seller is willing to accept a relatively small down payment and carry the balance, a higher full price can be achieved. On the other hand, the more cash the seller wants up front, the lower the full price. If the seller demands all cash, barring some form of outside financing, full price lowers – and, in most cases, the chance of selling decreases as well. Even in cases where outside financing is used, such as through SBA, etc., the lender will do everything possible to ensure that the price makes sense.
Sellers should understand that both what they hope to accomplish in the sale of their business and the structure of the actual sale can dramatically influence the asking price. Price is obviously important, but other factors may be even more important. For example, consider a seller with health issues who needs to sell as quickly as possible. In his case, timing becomes more essential than price. Another seller may place more importance on her business remaining in the community. In her case, finding a buyer who will not move the business may supersede price or certainly influence it.
Likewise, the structure of the deal can both influence price and be a more significant factor than price to either the buyer or the seller. The structure can dictate how much cash the seller receives up front, which may be more important than price for some sellers. On the other hand, sellers should also be aware how much the interest on their carry-back can add up to. If cash is not an immediate concern, monthly payments with an above-average interest rate may be enticing.
These examples all demonstrate the importance of the business broker professional sitting down with the seller prior to recommending a go-to-market price. During this meeting, the broker should find out what is really important to the seller, as these issues may have a direct bearing on the price.
Sellers should look at the following factors and rank them according to importance on a scale of one to five, with five being extremely important.
• Buyer Qualifications
• Full Price
• Amount of Cash Involved
• Commission/Selling Fees
• Closing Costs
• Exclusive Listing
• How the Business is Shown
• How a New Owner Continues the Business
By ranking these items and discussing them with a professional Business Broker, a seller can receive helpful advice from the broker on price, terms, and structuring the sale.
The post Price or Terms: The Structure of the Deal appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
When you are buying or selling a business, you might very well end up making a deal with someone from another generation. Therefore, it only makes sense to take the time to understand that individual’s background and how that might cause behavioral differences. It is important to understand and reflect upon where many of them are coming from and the collective experiences and trends that shaped their identities and perspectives. At the same time, you can identify your own biases, strengths and weaknesses that may be caused by your own upbringing.
The strategies in this article originated from Chuck Underwood who is considered a leading expert in the diversity of communication styles between generations. He is the author of a major book on the subject as well as host of the long-running “America’s Generations with Chuck Underwood” on PBS.
Underwood’s perspective is that people of each generation were molded by their unique formative years. The decisions that buyers and sellers make will be impacted by their generation. Mostly likely, the buyers or sellers you will be coming into contact with will be either Baby Boomers, Generation Xers and Millennials.
Working with Baby Boomers
Baby Boomers (those born between 1946 and 1964) are a major force in the business world. While they often possess a patriotic passion to improve the country, they were also witness to a time of great change via many movements including the civil rights and women’s movement.
When you’re dealing with Baby Boomers, it is important to remember that they will want to build relationships and get to know you. Common courtesy is very important to Baby Boomers. That means they’ll expect you to show up on time and turn your phone off during meetings.
You’ll want to keep in mind that older Baby Boomers may be experiencing hearing and eyesight loss. As a result, you’ll want to keep your type and font size larger, and make text easy to read.
When you’re working with your clients, it only makes sense to pay attention to the generation during which they were raised and adapt your approach accordingly. Understanding generational differences will help you get a leg up on the competition while at the same time helping your clients achieve their goals.
What is Generation X?
Generation X (or Gen X) had a wildly different formative experience than the Baby Boomers. Generation X is generally defined as being born from 1965 to 1980. This generation spent its formative years from the 1970’s through the 1990’s. In stark contrast the relatively more pleasant and optimistic childhoods of the Baby Boomers, Gen X had a rougher ride.
America became more mobile during the time period during which Generation Xers grew up. As a result, many children were uprooted and separated from their friends, family and hometown roots. Growing up, these individuals witnessed a variety of scandals ranging from political and religious figures to sports figures. Gen Xers witnessed the systematic dismantling of the American middle class and with it a general lowering of quality of life, opportunities and confidence in corporations. In the end, Gen X was quite literally left home alone and lived as “latch key kids.” It is no wonder that this neglected generation has some issues.
Individuals growing up during this time learned early on that they had to be ready to fend for themselves. Since Gen Xers have been met with consistent and systematic disappointment and even wide scale institutional betrayal, this generation, on average, is more distrustful of organizations.
Gen Xers are self-reliant and independent and one of their core values is survival of the fittest. In his view, Gen Xers are self-focused, individualistic and want everyone to skip the nonsense and get to the point. They have no real interest in getting to know you or playing a round of golf.
Working with Millennials
Millennials spent their formative years in the 1980s and early 90s. They are a very optimistic and tech savvy generation. They are also the most classroom educated generation in history.
It is also very important to note that Millennials are the most adult supervised generation in history. So-called “helicopter parents” who work to protect their children from setbacks are the norm. Employers find that Millennials are entering adulthood, but are still relying upon their parents to help them make decisions and even career choices.
Where Gen Xers are distrustful of the “wisdom of their elders,” Millennials actively seek out such advice. Likewise, Millennials tend to volunteer a good deal and look for ways to solve the world’s largest problems.
You will find that Millennials will enjoy building a relationship with you. Keep in mind these individuals tend to be quite socially conscious and they may very well expect you to agree with their views. Additionally, there is a chance that they will have their parents involved in their business dealings.
Keep in mind that the de facto tech addiction, or at the very least acute overreliance on technology, has led to issues with Millennials’ soft skills. They can often lack the ability to read another person’s body language and adjust accordingly.
In the end, regardless of what generation you are working with, it is important that you continually adapt. This will greatly increase the odds of cementing a successful deal.
The post Considering Generational Strategies appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
When you are selling a business, your business broker or M&A Advisor will likely create a Comprehensive Business Review, or CBR. This comprehensive document can then be presented to prospective buyers once they have signed all necessary confidentiality documentation. It is essential that this document builds trust between both parties, as this will go a long way towards achieving a successful deal.
The bottom line is that your CBR will be 95% positive. The majority of the document will be dedicated towards selling and promoting your business. Therefore, it only makes sense to disclose some potential problems. When handled correctly, the disclosure of problems can actually be a strong asset.
For example, current weaknesses of your business could become strengths in the mind of the buyer. For example, a business with a very poor online presence represents a substantial opportunity for a buyer to improve marketing and communications. Summed up another way, don’t be afraid to include negative information, especially if that information represents an opportunity.
It is important that there is an element of trust between the parties. Creating that sense of trust begins with the CBR’s seller section.
Buying a business is radically different from buying a home. When someone buys a home, they usually don’t care too much about the person who they are buying the home from. But buying a business is usually a different experience. Your buyer will want to feel as though they have a fairly clear understanding of who you are and what you are about.
In the seller’s section, the buyer should get a decent idea of who you are. Your broker or M&A Advisor will want to interview you to gain ample information to include in your CBR. Your broker may even want to find out about your family, hobbies, interests and more. You may even want to consider including photos of yourself and your family.
The bottom line is that a potential buyer should be able to pick up the CBR and get a good feel for what you are like. If no level of trust is ever established between the buyer and seller, then it will be much more challenging for the deal to be successful.
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The first face-to-face meeting between a buyer and seller is one of those “make or break” meetings. The best way to prepare for it is to think of this meeting like a first date. The dynamics are very similar. You’ve spoken on the phone and you’ve emailed. Now there is enough interest that you both want to meet. Like a first date, the goal here is to get to know each other but, I recommend you do the following three things to ensure this meeting goes as well as possible.
Preparation means three things. First, have a plan for the meeting. Where will you meet? When will you meet, during business hours or after hours? Who do you want to attend from your side? Do you want to have handouts or a formal presentation? Will you be serving refreshments or snacks? Do you know who the buyer is bringing to the meeting? Will you give the buyer a tour of your business? Does the business show well or do you need to do a little housekeeping before buyers visit? Does it make sense to give buyers samples of what you make or sell?
You should determine these things, not the buyer. Once you have a plan send your plan to your buyer. Buyers need to understand how your sales process works and what is expected of them during each step of the process.
Determine your Desired Outcomes Ahead of Time
The primary goal of this initial meeting is to show the buyer that everything you said about your business in the offering memorandum was accurate so they have enough confidence in you and your business to submit a purchase offer or Letter of Intent (LOI) to buy your business. However, you may also have several other goals as well. Below is a list of some typical secondary goals.
- Confirm the buyer’s financial qualifications by asking questions like how much money he had available to invest, what is the source of these funds, where is the buyer in discussions with potential lenders, what is the buyer’s credit score, etc.
- Confirm the buyer’s business experience by asking questions like, tell me about the other businesses you’ve owned, or tell me about your previous business management experience.
- Confirm the buyer’s interest in your business by asking them what they think about your business, how does it compare to other businesses they’ve looked at, does it fit what they were looking for?
- Assess the buyer’s character. It’s important that you sell your business to someone you like, respect, and admire. Chances are if you like the buyer, so will your employees and customers. Trust your gut. If something doesn’t feel right about the buyer, it probably isn’t
- Determine the buyer’s timeline. Business brokers are fond of saying “Time Kills All Deals” and it’s true. Another important goal is to determine how quickly a buyer is prepared to move and to determine if their timeline and your timeline line up.
Have an Agenda
Preparing an agenda ahead of time will help ensure that you accomplish your goals for the meeting. A sample agenda for a successful buyer meeting might look like this.
- Introductions & Welcomes – 10 minutes
- Buyer Background. Ask Buyer to describe their background, experience and why they are looking to buy a business – 10-15 minutes
- Seller Background. The seller describes how the seller got into the business and why they are exiting – 10-15 minutes
- Business Update. The seller gives the buyer a summary of how the business has performed since the offering memorandum was prepared and provides the buyer with a current year-to-date P&L statement. 10 minutes.
- Q&A. Seller to answer any questions the buyer has. 15-30 minutes
- Tour. Give the buyer a tour of the business and continue to answer questions throughout the tour. 15-30 minutes.
- Buyer Feedback. Return to your office or conference room and ask the buyer what they think. Discuss what they like and what they didn’t like. Get a list of any additional information the buyer would like from you.10-15 minutes.
- Next Steps/Action Items. Tell the buyer what your timeline is and if they are interested, the next step is for them to submit an offer or Letter of Intent. Determine if they plan to submit an LOI and if so, when they plan to do it. 10-15 minutes.
Of course, this is just a suggestion. Feel free to modify it to suit your particular situation. However, please note that the entire meeting is designed to last between 1 1/2 and 2 1/2 hours. Try to keep the meeting to around 2-3 hours, max. Sometimes, the chemistry between a buyer and seller is great and the conversation can continue for four or five hours, but I don’t recommend it. If that’s the case, I recommend scheduling a second meeting rather then let the first meeting go for more than three hours.
Asking and Answering Questions
Now that you have an agenda, the next steps if to prepare a list of questions you want to ask the buyer. Keep this with you during the meeting as a reference so you don’t forget any of your questions.
When responding to a buyer’s questions, try to only answer the question asked. It’s best to keep your answers factual and not share long war stories or go off on tangents about things the buyer didn’t ask about. For example, if a buyer asks what are your Average Days Receivable is, just answer the question. Don’t tell a story about the one customer who refuses to pay within 30 days, and often stretches you out to 190 days, so you told him he now needs to pay in full when he places an order.
Building a Positive Relationship
It goes without saying that you should do everything possible to keep the meeting polite and respectful and to avoid any discussion about politics or religion, which often can be hot points.
Nothing builds a more positive relationship than truth, so make sure that all of your answers are truthful, accurate, and complete. While you are trying to sell your business, you don’t want to come across as a salesperson. Let y our business sell itself. The best way to do that is to as real and as honest as possible.
For example, if a buyer asks who your competitors are be truthful. Every business has some level of competition. So don’t pretend that your company has no competition. This will simply make the buyer skeptical and make him wonder what else you may be fibbing about.
One last word of advice. Be sure to do your homework on the buyer ahead of time by asking the buyer to send you a copy of the buyer’s resume before your meeting. That way, you can do a Google search on the buyer and the companies he’s owned or worked for so you can assess during your meeting how truthful the buyer is being with you.
If you follow this advice, you will greatly increase the odds that your first meeting with a buyer will accomplish all of your objectives.Read More