The Casual Beer Does Not Yield Extra Return When You Sell Your Business

In actuality, that beer could cost you millions…

We interact with business owners on a daily basis and with many we build multi-year relationships. One of our unconditional mantras is that no business owner should ever sell his/her business by talking to only one buyer.

Regardless of our efforts and how much we beat this drum, we often check in with business owners with whom we have had this conversation, and we are surprised when they tell us that, “we are close to selling our business,” or, “we just sold our business.”

As you probe how the business owner picked his/her buyer, we hear things like this:

“They wore jeans, not a suits and ties”

“He had a beer with me”

“I felt so relaxed because he was a regular guy like you and me”

Don’t pick your buyer because of what they’re wearing or what they’re drinking.

Look, everybody has a schtick. Maybe it’s the jeans, beer, a normal personality, or having grand plans. The bottom line is, if you fall in love with one buyer, chances are high that you are going to get taken advantage of when it comes to the value this (jeans wearing, beer swigging, regular) guy is going to pay you for your business. And at the end of the day, it’s the value you receive that is important.

Buyers are very savvy and they know how to make a business owner feel comfortable discussing the purchase of the business. They want to make the owner comfortable. So comfortable that they don’t run a process involving more buyers.

If you hire an investment banker, run a process, and involve more buyers, it’s going to cost them more money. Why? because you will have the power of competition to create value during the sale.

Buyers that reach out to you are very experienced. They will begin to demand terms and conditions from you that, without the leverage of having a process, you will feel compelled to accept.

Not every transaction is combative, but selling your company should be about maximizing value and getting the best terms.  Friendly buyers are great, but that shouldn’t be a consideration when it comes to a major financial decision.