In Part One (See Link to Part One), we discussed the impact on price, terms, and expediency of having multiple buyers simultaneously interested in a business. Dissemination of information about the business to potential buyers was mentioned as part of the process to entice the largest quantity buyers. But this information isn’t intended to only produce the most buyers. Its purpose is also to bring forward the best buyers.
Disclosing information up front to improve the quality of buyers and of offers
In the real estate scenario presented in Part One, one could hardly expect a home buyer to submit an offer on a house without knowledge of some key pieces of information such as location, the number of bed and bathrooms, or the seller’s price expectations. However, we could provide countless examples of business owners who tell us that they would like to sell their business, but who want us to present them with a buyer before they provide relevant information about the business.
Lack of information significantly handicaps our ability to match the business to the buyers for whom the business would be the best fit. Though the business website might give some indication of what the company does, it is nearly impossible to determine which buyers might find it most attractive without details about the business operations, financial history, and anticipated price. It is extremely difficult to get a buyer to spend time and effort considering a transaction, much less making an offer on one, when they have no idea whether the business meets any of their needs and criteria and when the business owner’s motivation might be perceived as questionable. And if forced to make an offer prior to knowing these details, the buyer’s offer is likely to be lower to accommodate for the unknown and is very likely to be modified or withdrawn as details are disclosed during due diligence.
In order for an Apex Business Advisor to bring forward the best buyers for a business, the Advisor must gain significant insight into many aspects of the business. This allows the Advisor to present the business to potential buyers in a way that best highlights its attributes and puts its challenges into perspective. Buyers are then able to make a much more informed decision about whether the business matches their business-buying requirements.
A buyer’s conclusion that a business is a good fit for them can positively impact the buyer’s offer price, excitement, motivation, and sense of urgency. An informed buyer’s offer also stands a much greater probability of surviving the due diligence process, as the opportunity for the buyer to uncover “surprises” has been significantly diminished. Now that we’ve defined the importance to the business owner of maximizing both the quantity and quality of the buyer pool and strategies for accomplishing this, in Part 3, we’ll discuss a real life example of how this resulted in a transaction that was beneficial to both the buyer and the seller.
Contact Apex Business Advisors for more information on our procedures for identifying the best buyers for your business.