I have an outgoing client that I wish would never get on an airplane. Every time he goes on a trip, he begins talking with the person in the seat next to him or at the airport lounge. Inevitably the conversation turns to "what do you do?" and my client answers that he is a CEO of a company he founded and then...... he says that he wants to sell it in the near future.
While this news probably means nothing to the bulk of the people he talks to while traveling, he inevitably meets up with a private equity guy/gal or interested investor who begins to vibrate with excitement over their good fortune of running into someone with a business for sale right in the airport lounge!
Stop vibrating people.
I have worked with this entrepreneur for years. I know what valuation he needs to receive for his business in order to meet his personal and financial goals and for years, I have told him it's not time to sell. He needs to spend some time working on growing the business in a way that improves cash flows and margins. He needs to think about his pricing strategy and what new markets make sense for the business' existing manufacturing capabilities.
The interested people from the airport generally follow up quickly and if they are really serious, they find their way to me. I kindly tell them that at some point the business will be for sale and that I will keep their contact information on file.
This is a good reason why having an investment banker on your team of business advisors is a good idea. We take all those calls. We also save you from potentially wandering down a path with a buyer where you give away your negotiating leverage and get stuck in a deal that just doesn't make sense.
Mentioning, in a casual way, that you want to sell your business is a dangerous practice.
If you want to sell your business, you need to begin the process in an organized way. That means, when you are ready and the business is able to produce a valuation that is acceptable, you and your investment banker approach many buyers at the same time.
Approaching buyers one by one means that either you will be losing your leverage as a seller (because you are negotiating with just one party) or you will be tainting the market of interested parties (because you showed them the business before it was ready to be sold).
When a business sale process run by an investment banker has begun, materials are already prepared to make sure the business is presented in its best light, the financial statements have been scrubbed to remove any personal or one-time expenses, and the buyer list has been carefully crafted to make sure that the groups we approach are qualified buyers who are covered under confidentiality agreements.
Your investment banker will find buyers. It is an important part of what they bring to the table. Please stop telling people your business is for sale.
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