A Product You Can’t Openly Advertise

You want the whole world to know your products are for sale. You want everyone to know your house is for sale. Advertise, advertise, advertise.

The one thing everyone knows about selling a business? Keep the sale confidential. You don’t want to indiscriminately announce the sale to the world. Employees may leave. Customers might go elsewhere. Competitors will start licking their chops. Suppliers may get nervous.

This creates one huge dilemma. How do you go about selling a business without letting people know it’s for sale?

A Product the Seller Has to Finance

Getting financing for real estate, cars - anything - is relatively straightforward; Lenders know they can r

An Intangible Product

Just about everything for sale is a tangible thing. You can see what you’re getting. You know exactly what you’re buying. Unfortunately, this is not the case when it comes to selling a business.

Your business possesses a collection of tangible assets: your equipment, inventory, accounts receivable, etc. Contrary to what a lot of people believe, these are the items that bring the least value to your business.

It’s the intangibles - the assets that cannot be perceived by the senses - that make all the difference to a buyer. These are things like:

• Quality of management
• Uniqueness of business model
• Industry and market position
• Systems and procedures in place
• Quality of accounting and information systems
• Relationships with distributors & suppliers
• Customer loyalty and diversity
• Product/service quality and diversity
• Quality and morale of employees
• Patents, trademarks and other intellectual property

The value of these intangibles –that is, the amount paid by the buyer over and above the value of the tangible assets- is referred to as goodwill.

So what does this mean to you, the seller?

The real value in your business is found in things you cannot see, hear or touch. As the seller, it’s your job to convince buyers that these things exist and will earn them profits. Bet you don’t have to do this with whatever you’re currently selling.

A Product With No Objective Value

A business is worth what someone is willing to pay for it. End of story.

Isn’t this true of every product? Sure. But with other products you have the ability to compare to other sales in order to set a price. How much is your house worth? Ask your realtor. She’ll quickly look up comparable sales, as will the buyer’s agent, and determine a reasonably accurate probable selling price. There is an efficient market at work for most commodities.

But not when it comes to selling a business. Although you will want to look at comparable businesses when trying to set a price, you have to keep in mind that there really are no comparable businesses. Your business is unique because of all those intangibles we discussed.

Sure, you can get opinions of value. You can get them from industry associations, business brokers, valuation experts, accountants, friends and even your spouse. And they’ll all be different. Each person who attempts to set a value on your business does so through personal filters and judgments about what’s valuable.

How do you sell something when no one seems to know what it’s worth?

A Product You Can’t Walk Away From

Sell anything else, collect your money and you’re done. Sell a business, and you can’t just walk away.

You may end up tied to the business due to:

• Seller financing. If you’ve invested in the business by financing the buyer, you’ll want to make sure it’s being run well until the money is paid back.
• Training and consulting. Most buyers want the seller involved for some period after the sale. This can range from a few weeks to several years.
• Earn-out provision. In an earn-out, some of the proceeds of the sale are dependent upon the future success of the business.

What if you really just want to be done with the whole thing? Sellers who are reluctant to stick around and/or finance part of the deal make buyers nervous. You will lower your selling price and may even find it very difficult to sell.

A Product You Can’t Openly Advertise

You want the whole world to know your products are for sale. You want everyone to know your house is for sale. Advertise, advertise, advertise.

The one thing everyone knows about selling a business? Keep the sale confidential. You don’t want to indiscriminately announce the sale to the world. Employees may leave. Customers might go elsewhere. Competitors will start licking their chops. Suppliers may get nervous.

This creates one huge dilemma. How do you go about selling a business without letting people know it’s for sale?

A Product the Seller Has to Finance

Getting financing for real estate, cars - anything - is relatively straightforward; Lenders know they can r

The value of these intangibles –that is, the amount paid by the buyer over and above the value of the tangible assets- is referred to as goodwill.

So what does this mean to you, the seller?

The real value in your business is found in things you cannot see, hear or touch. As the seller, it’s your job to convince buyers that these things exist and will earn them profits. Bet you don’t have to do this with whatever you’re currently selling.

A Product With No Objective Value

A business is worth what someone is willing to pay for it. End of story.

Isn’t this true of every product? Sure. But with other products you have the ability to compare to other sales in order to set a price. How much is your house worth? Ask your realtor. She’ll quickly look up comparable sales, as will the buyer’s agent, and determine a reasonably accurate probable selling price. There is an efficient market at work for most commodities.

But not when it comes to selling a business. Although you will want to look at comparable businesses when trying to set a price, you have to keep in mind that there really are no comparable businesses. Your business is unique because of all those intangibles we discussed.

Sure, you can get opinions of value. You can get them from industry associations, business brokers, valuation experts, accountants, friends and even your spouse. And they’ll all be different. Each person who attempts to set a value on your business does so through personal filters and judgments about what’s valuable.

How do you sell something when no one seems to know what it’s worth?

A Product You Can’t Walk Away From

Sell anything else, collect your money and you’re done. Sell a business, and you can’t just walk away.

You may end up tied to the business due to:

• Seller financing. If you’ve invested in the business by financing the buyer, you’ll want to make sure it’s being run well until the money is paid back.
• Training and consulting. Most buyers want the seller involved for some period after the sale. This can range from a few weeks to several years.
• Earn-out provision. In an earn-out, some of the proceeds of the sale are dependent upon the future success of the business.

What if you really just want to be done with the whole thing? Sellers who are reluctant to stick around and/or finance part of the deal make buyers nervous. You will lower your selling price and may even find it very difficult to sell.

A Product You Can’t Openly Advertise

You want the whole world to know your products are for sale. You want everyone to know your house is for sale. Advertise, advertise, advertise.

The one thing everyone knows about selling a business? Keep the sale confidential. You don’t want to indiscriminately announce the sale to the world. Employees may leave. Customers might go elsewhere. Competitors will start licking their chops. Suppliers may get nervous.

This creates one huge dilemma. How do you go about selling a business without letting people know it’s for sale?

A Product the Seller Has to Finance

Getting financing for real estate, cars - anything - is relatively straightforward; Lenders know they can r

Isn’t this true of every product? Sure. But with other products you have the ability to compare to other sales in order to set a price. How much is your house worth? Ask your realtor. She’ll quickly look up comparable sales, as will the buyer’s agent, and determine a reasonably accurate probable selling price. There is an efficient market at work for most commodities.

But not when it comes to selling a business. Although you will want to look at comparable businesses when trying to set a price, you have to keep in mind that there really are no comparable businesses. Your business is unique because of all those intangibles we discussed.

Sure, you can get opinions of value. You can get them from industry associations, business brokers, valuation experts, accountants, friends and even your spouse. And they’ll all be different. Each person who attempts to set a value on your business does so through personal filters and judgments about what’s valuable.

How do you sell something when no one seems to know what it’s worth?

A Product You Can’t Walk Away From

Sell anything else, collect your money and you’re done. Sell a business, and you can’t just walk away.

You may end up tied to the business due to:

• Seller financing. If you’ve invested in the business by financing the buyer, you’ll want to make sure it’s being run well until the money is paid back.
• Training and consulting. Most buyers want the seller involved for some period after the sale. This can range from a few weeks to several years.
• Earn-out provision. In an earn-out, some of the proceeds of the sale are dependent upon the future success of the business.

What if you really just want to be done with the whole thing? Sellers who are reluctant to stick around and/or finance part of the deal make buyers nervous. You will lower your selling price and may even find it very difficult to sell.

A Product You Can’t Openly Advertise

You want the whole world to know your products are for sale. You want everyone to know your house is for sale. Advertise, advertise, advertise.

The one thing everyone knows about selling a business? Keep the sale confidential. You don’t want to indiscriminately announce the sale to the world. Employees may leave. Customers might go elsewhere. Competitors will start licking their chops. Suppliers may get nervous.

This creates one huge dilemma. How do you go about selling a business without letting people know it’s for sale?

A Product the Seller Has to Finance

Getting financing for real estate, cars - anything - is relatively straightforward; Lenders know they can r

How do you sell something when no one seems to know what it’s worth?

A Product You Can’t Walk Away From

Sell anything else, collect your money and you’re done. Sell a business, and you can’t just walk away.

You may end up tied to the business due to:

• Seller financing. If you’ve invested in the business by financing the buyer, you’ll want to make sure it’s being run well until the money is paid back.
• Training and consulting. Most buyers want the seller involved for some period after the sale. This can range from a few weeks to several years.
• Earn-out provision. In an earn-out, some of the proceeds of the sale are dependent upon the future success of the business.

What if you really just want to be done with the whole thing? Sellers who are reluctant to stick around and/or finance part of the deal make buyers nervous. You will lower your selling price and may even find it very difficult to sell.

A Product You Can’t Openly Advertise

You want the whole world to know your products are for sale. You want everyone to know your house is for sale. Advertise, advertise, advertise.

The one thing everyone knows about selling a business? Keep the sale confidential. You don’t want to indiscriminately announce the sale to the world. Employees may leave. Customers might go elsewhere. Competitors will start licking their chops. Suppliers may get nervous.

This creates one huge dilemma. How do you go about selling a business without letting people know it’s for sale?

A Product the Seller Has to Finance

Getting financing for real estate, cars - anything - is relatively straightforward; Lenders know they can r

A Product You Can’t Openly Advertise

You want the whole world to know your products are for sale. You want everyone to know your house is for sale. Advertise, advertise, advertise.

The one thing everyone knows about selling a business? Keep the sale confidential. You don’t want to indiscriminately announce the sale to the world. Employees may leave. Customers might go elsewhere. Competitors will start licking their chops. Suppliers may get nervous.

This creates one huge dilemma. How do you go about selling a business without letting people know it’s for sale?

A Product the Seller Has to Finance

Getting financing for real estate, cars - anything - is relatively straightforward; Lenders know they can recover the loan quite easily.

When it comes to lending money to a business buyer, no one wants to risk it. Banks and other lenders are reluctant to finance anything but certain assets such as inventory, accounts receivable, machinery and equipment. Even then, they will only lend a percentage of the full value. And they prefer assets that can be easily converted to cash.

Most businesses sell for more than just asset value, unless they’re one step away from going out of business. This excess is goodwill, and lenders simply refuse to finance goodwill.

Sweet deals do happen. But, if you’re counting on selling a business for cash only, you’re probably in for disappointment. Most often, the seller has to finance part of the deal.

A Life Decision

Perhaps the major reason selling a business is different is that your business is likely a huge part of your life and most, if not all, of your nest egg. Parting with your business is more like getting a divorce or seeing your children leaving home.

The emotions you will have to deal with when selling your business may be the biggest obstacle to a successful sale. You may not realize it consciously, but deep down inside you may not really want to sell.