by: Theodore P. Burbank, FIBBA, CBI

You didn’t get to be the owner of a successful private company by following the crowd.  You instinctively found opportunities to prosper within every crisis you faced.  Now, you are considering selling your company to perhaps, spend more time on Cape Cod or restoring that ’55 T-Bird that’s been collecting dust in the back of the shop for years now.  But, with the economy in the shape it is, doubtless best to put any plans of selling on hold for awhile until things turn around. Right or wrong?

Good News
Our experience selling businesses more than 2,000 businesses over almost thirty years through the best and worst of times is that private companies’ valuation methods do not change during a recession. In fact, a down economy might be the best time to sell a good company!

Here are some of the reasons why:

• Savvy individual and corporate acquirers understand that the best way to grow is through acquisition of profitable companies that will help their core business prosper.  They realize they must take advantage of an opportunity when it's available or risk losing it altogether.
• Fewer profitable companies are on the market in poor economic times primarily because business owners who, under normal conditions, would be selling their businesses are deferring a sale because conventional wisdom dictates that “you can’t get a good price in a down market.”   
• Serious buyers are constantly in search of quality acquisition opportunities.  The number of Main Street and middle market business buyers increase as more and more people are laid off and/or outsourced. 
• You can get tomorrow’s price today for your business if you choose a buyer who recognizes the opportunity your business represents and considers expectations of future profitability when assessing value.

In order to obtain an optimum price for a business, regardless of the economic condition, one must attract the type buyer who will recognize the opportunity the business represents.  In real estate, optimum value is determined by the entity that will recognize highest and best use of a property.  Business prices typically reflect an acquirer’s perception of future earnings under their ownership. Therefore, the optimum value of a business is determined by the buyer who recognizes the most opportunity the business represents.

Buyer Identification is Key to Success

Different Buyers pay different prices and only the right buyer will pay the right price.  The right buyer will recognize that all the right things are wrong and the business will certainly improve and flourish under their management.  You have to attract the right buyer if you wish you obtain the right price, regardless of market conditions. But wait!  How does one determine and find the “Right Buyer”?  How many types of buyers are there in today’s marketplace for small and middle market businesses?

How to Identify Your Ideal Acquirer

There are essentially two ways to identify and locate your ideal buyer:

1.      Engage a Business Intermediary or Broker who is familiar with the marketplace for your size and type business.  Ideally this professional will employ a two step approach to the process i.e.: 

o   Provide you a summary of buyers and what they can be predicted to pay for your business, list of recommendations both long and short term to enhance and increase your company’s value – in other words, be sure that a satisfactory outcome is obtainable before you bind yourself to a contract to sell.

o   Once satisfied that you can obtain your price, even in a down economy, you authorize marketing efforts to begin.

2.      Obtain a copy of our “Business Selling System” and begin the process on your own as a self study course on How to Sell Your business for the Most Money (without anyone knowing it’s for sale).  The course of study is divided into three sections: 

o   Section One - Designed to provide the business owner with an overview of marketplace dynamics, a description of the different buyers, how they think and how their thinking impacts value.  The selling system’s software will generate probable price and terms for your business by buyer type. 
If the valuation is too low, then the Section One books and software can guide you in increasing your valuation, very often without having to increase declared profits.

o   Section Two – Once you are satisfied with the probable price and terms of a sale marketing and Due Diligence materials are created and assembled

o   Section Three – Marketing efforts can now begin.

You may choose one of three ways to do the actual selling of your business:

a)                          Sell it yourself - Follow the Business Selling System’s step by step process to selling a business or

b)                         Sell it yourself as above but with the assistance of an experienced Deal Maker serving as your mentor or finally

c)                          Engage a Business Intermediary or Broker to do all the selling for you.

In Summary:

Business pricing methods remain unchanged even in a down economy; fewer profitable companies are on the market, the number of serious buyers in the marketplace increases in a down economy, savvy business owner’s know Only the Right Buyer will pay the Right Price and, you need not sell unless you can get your price.