Last week I had a rather testy exchange with one of my clients. He’s a brilliant technologist and I’ve been trying to sell some software and other intellectual property he developed. It’s an asset sale, he has no revenues or customers. He’s frustrated at the lack of buyer interest – they just aren’t beating a path to his door as he expected them to do. He truly believes he has the “next big innovation” in the industry. Anyone with any sense in the space would immediately see what an awesome thing he has created, he believes.
What matters, of course, is what prospective buyers think.
After hearing the “no’s” and objections from the initial set of companies I reached out to, he concluded: “YOU’RE THE PROBLEM! You can’t sell it because you don’t believe in it! Everyone knows you can’t sell something you don’t believe in!”
He is wrong, but it’s a common misconception among sellers.
Your business broker’s job is to neither believe in nor disbelieve in your business proposition. His job is to package the “story,” then present it objectively and dispassionately to a target list of qualified buyers. In fact, blindly believing in your business proposition could put him at a disadvantage. He needs to listen carefully and understand why the proposition is — or is not — resonating with a prospect. Otherwise, he will fail to understand the buyer’s needs and requirements. He will miss the signals to pivot the proposition.
You and your employees, of course, should fervently believe in your business. You should never hire anyone to work in your business that does not believe in it. Your business broker is not your employee. His job is to get to a transaction that is acceptable to both parties. That is the reason most pros call themselves an intermediary. They are expert go-betweens. The only thing a business broker needs to believe is the buyer’s ability to purchase.
The fact most sellers do a lousy job of selling their own businesses is because they are not, by default, go-betweens. They believe, perhaps too much, in their business proposition. They only see it from their perspective. Their problem is:
They are too close to it,
don’t know how to listen to or read buyers,
don’t know how to pivot the proposition,
don’t know how to structure the deal,
and don’t know how to get a buyer to the closing table.
That’s the reason they hire a business broker – an intermediary – a go-between: to get the job done in spite of themselves.
An attorney does not have to believe in the innocence of her client to represent him effectively. A surgeon does not have to believe his patient will be cured by performing her surgery. A business broker does not have to believe in your business to market and sell it successfully.
What does your business broker learn from a disinterested pool of buyers?
With the exception of highly desirable businesses that are wildly profitable and priced right to sell (only about 1% of all businesses for sale), the marketing of a business usually requires adjusting four key variables.
1. The Price. Surprise, surprise, most businesses are initially over-priced. After the seller satisfies himself that no one is interested in over-paying for the business, does he usually relent and lower the price. Price is usually the first part of the proposition to be adjusted.
2. The Story. A broker goes to market with the story he thinks most buyers want to hear. This is done in two parts: the teaser and the prospectus. If the story does not resonate, either the target market or the story is wrong.
Assuming he’s talking to the right kinds of buyers and they aren’t buying the story, he needs to figure out what story they want to hear. For example, rather than emphasizing the merits of the location or owner benefit (discretionary income), he might find that most buyers only care about acquiring the customer base or the employees (Acquihire). The story is usually the second part of the proposition to be adjusted.
3. The Target List. There are two ways to market a business for sale: Inbound and outbound. Inbound involves posting it on the various MLS and M&A exchanges — and then waiting for inbound inquiries. It also involves sending a blast to the broker’s in-house buyer list. There is no defined target list, only a wish and a prayer. Unfortunately for some sellers, many brokers only do inbound marketing. They never adjust the target list because they never had one to begin with.
A good broker will also do outbound marketing by putting together a specific target list of qualified buyers and proactively reaching out to them. The inbound campaign helps to adjust the message and the list for the outbound campaign. If the outbound target list produces no results, the broker goes back to the drawing board to develop an entirely new list. All too often, the business was marketed to buyers in the wrong segment of the market. The challenge is to find buyers in the right market segment — those who will be receptive to the story and the price. The target list is usually the third part of the proposition to be adjusted.
4. The Deal Structure. All too often, the most important part of the business proposition is how the purchase can be financed. This may involve SBA financing, seller financing, or other kinds of creative incentives and inducements to make the transaction happen for both parties. The deal structure is usually the fourth part of the proposition to be adjusted.
If all these adjustments are smartly and diligently made by your business broker — and there still are no interested buyers, then there never was a salable business proposition. In that case you might be right, I never did believe in it.