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Seven Habits of Successful Sellers
H aving been associated with many successful deals over the years,
we have come to appreciate that many successful sellers act in a similar fashion. Since the
selling process is not the easiest one to endure, we thought that it might be helpful to share
these seven habits of successful sellers.
Clear Purpose
Successful sellers have a clear picture
of what they want to accomplish in the transaction. Whether their
focus is simply taking some hard earned equity out of the business or to
retire,
Successful sellers have a clear picture
of what they want to accomplish in the transaction.
successful sellers must come to grips with their ultimate objectives before
launching into the sales effort. As you might imagine, this clarity is not
always arrived at easily. Given the many pressures on today’s business
owner, taking time to analyze one’s personal objectives is not always at
the top of the priority list.
However, entering into the sale transaction process without this clarity
of purpose is almost assuredly a “deal killer.” Whether the seller’s
motivation is based upon boredom or burn-out, retirement, poor health, or
some other pressing issue, we implore you to seek out this clear purpose.
Additionally, although financial return in the sale of the business is
always of critical importance, we have discovered that it is not always the
most important one.
In the large
percentage of circumstances, the successful seller has a
more pressing motivator than money in wanting to sell the business.
Attitude
The
selling process is an invasive one. Owners who are not used to being
questioned about their efforts and results can tend to adopt a negative
attitude towards a buyer and the transaction process.
The fact is that good chemistry between a buyer and seller is one
of the strongest components of a successful transaction. Therefore,
maintaining a positive and cooperative attitude during the process
is of paramount importance for a seller
maintaining a positive and cooperative attitude during the
process is of paramount importance for a
seller.
This may sound rather simplistic and basic onto itself but, it
has been difficult for most owners to accomplish. Preparing yourself for the
“grind” of a deal is extremely important. Successful sellers have
demonstrated that a positive, can-do attitude will almost always lead to
positive and profitable results.
Reasonableness
There will be a significant amount of items to
be negotiated on the way to a successful conclusion. Owners are faced
with a myriad of trade-offs during the process. Although the negotiations may
become difficult and seemingly adversarial at times, owners who have
successfully completed transactions have exhibited an incredibly high degree of
reasonableness.
Thoughtfulness and patience are two key virtues that a seller cannot
possess too much of during the time that negotiations are taking place.
Thoughtfulness and patience are two key virtues that a seller cannot
possess too much of during the time that negotiations are taking place.
Additionally, having confidence in their M&A advisor and obtaining input
from a lawyer who has had previous transaction experience are critical in
establishing the level of reasonableness necessary to be successful.
Keeping in mind that most Letters of Intent are entered into by a willing
buyer and seller, almost all “deal points” can effectively be worked out
with a sound basis of reasonableness existing between the parties.
Successful sellers understand that a
successful transaction means that it is a win for both the buyer and
seller and will tend to conduct their conversations in this manner.
Openness
Sharing one’s corporate information is of extreme importance. The M&A broker
will have a strong confidentiality agreement executed between the parties
prior to any information being shared.
In this manner, many fears of
sharing sensitive information can be mitigated. Working with a top notch
M&A professional should also give some piece of mind as the broker
should be producing excellent quality buyers who understand the
significance of keeping any shared information confidential and private.
If a buyer is not dedicating themselves to an intense due diligence
effort, you can almost accept the fact that they are not the right buyers for
the company.
Although much information will be shared prior to actually receiving a
non-binding Letter of Intent, you can be certain that once the due
diligence period starts that almost nothing is left unturned.
If a buyer is not dedicating themselves
to an intense due diligence effort, you can almost accept the fact that
they are not the right buyers for the company. The bottom line is to
adopt a policy of openness based upon the instructions of your M&A
professional and be aware that good buyers also have a reputation to
uphold by not releasing any sensitive information without the seller’s
consent.
Organization
Knowing where to get the large amount of data that will be requested by a
buyer can save a tremendous amount of time and effort. If the seller’s
company has not instituted good reporting and tracking systems prior to
Knowing where to get the large amount of data that will be requested
by a buyer can save a tremendous amount of time and effort
entering into the selling process, the selling effort will prove to be a
painful one. Needless time, effort, and money will be spent trying to produce
information that should have been readily available. Moreover, the positive impact that the selling organization can
gain from appearing to have this organization already in place is
enormous.
We would encourage all potential sellers to make a concerted
effort prior to actually beginning the sales process to get the company’s
data situated for the due diligence process. This effort will be doubly
rewarded by making this intense period less stressful for the seller as
well as shortening the overall process enabling a quicker close of the
transaction.
Preparation
Successful sellers have
prepared their companies for sale in more ways than data organization. For
instance, if the owner wishes to leave the business after the sale and
transition to the buyer, he will have built a credible management team
under him to take his place. Most sellers don’t realize that in most
instances, buyers would prefer to keep the seller and his existing
management in place. This naturally makes for a more suitable transition
as well as promotes future corporate performance.
However, if a buyer is
faced with having to replace the owner and there is no team in place to
secure the future operations of the business, the buyer will most likely
not enter into this type of a challenge. The owner should manage the business
prior to a sale effort taking place so that balance sheets are cleaned up
and the overall corporation’s performance will be highlighted. Nothing
Most sellers don’t realize that in most instances, buyers would
prefer to keep the seller and his existing management in place
brings more value to a company than established profitable performance.
Although the promise of high earnings in the future is something that a
buyer will consider, the current valuation of the company will be based in
large part upon the recent profitability of the firm.
Working with an
M&A professional who is skilled in assisting the owner in reaching a reasonable
valuation will greatly assist in preparing the owner expectations in this
area. Successful sellers have done
their homework and have prepared their companies to be introduced to the
best buyers in the market.
Performance
Make no
mistake about it, a company that is involved in a sale transaction must
continue to perform. We have often found that the sales process
sometimes detracts from the owner’s focus on company performance. It is
extremely important that the owner not take his foot off of the gas during
It is extremely important that the owner not take his foot off of
the gas during this critical period of time.
this critical period of time. Almost any due diligence period will tend to
bog down or collapse if the company’s results are showing a marked
decline.
In many cases, buyers will be forced to attempt to renegotiate
the original Letter of Intent given the sudden change in performance. A
more serious change would constitute a buyer taking the offer off the
table and both parties will have suffered a loss of time and money during
the due diligence process. Successful sellers do not take their eye off of
performance despite all of the additional burdens placed upon them by the
sale transaction.
Robert A. Veri
CEO
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