No doubt it’s flattering. You’ve worked hard building or running a business and now someone has expressed interest in buying it. You hadn’t considered selling but maybe now is a good time. But be careful how you respond. It’s easy to get caught up in the excitement and make costly mistakes. Here are a few tips on handling that unsolicited offer.
• Be careful about sharing information
If the potential buyer is really serious about buying your business, he won’t mind signing a non-disclosure agreement. Even then, be selective on any financial information you share. Your current financial statements were most likely prepared with the goal of minimizing the company’s tax liability and not to showcase its profitability. Make sure your financial statements are prepared to show maximum profitability.
You may also wish to hire an independent auditor with experience in your industry. Buyers may request independently audited records for the past two or three years.
• Hire a team to value and negotiate any potential sale
If you become serious about contemplating a sale, hire the best team you can to guide you through the process. In addition to any regular advisors you may have, you may also need a business broker, a financial planner, a lawyer, a financial advisor and an accountant.
Before you enter into any type of negotiations, you need to get an accurate, up-to-date valuation of your business. Selling a business may be the biggest financial transaction of your life. Don’t try to handle it on your own.
It’s intoxicating for someone to admire what you have created or have been running. Just beware of someone who heaps on too much praise — don’t be blinded by it and let your guard down, which may cause you to share too much information or value your company too low. As Adlai Stevenson said, “Flattery is all right if you don’t inhale.”
• Think about the potential future of your business
Dana Levy sold the email newsletter Daily Candy to Comcast for a reported $125 million, right before the market crashed. When ad sales didn’t materialize, Comcast began trying other avenues to raise revenue, changing her one-a-day email business model. In 2011 Comcast acquired a majority stake in NBCUniversal and shut down Daily Candy in March 2014. She and her employees immediately tried to buy it back but Comcast wasn’t interested.
“What they didn’t try was maintaining the brand integrity,” Dana said in a video interview on inc.com. “What Comcast acquired wasn’t necessarily a list. It was a brand, a brand that was adored.”
How would you feel if the acquiring entity of your business is unable or unwilling to continue your business as you envisioned it?
• Ask yourself, do you really want to sell?
It’s nice to have a potential buyer and maybe it is a good time for you to get out of the business and try something new. But this is a question only you can answer for yourself. Do you still enjoy and feel passionate about your company? Do you wish to stick around for a while and be instrumental in its future success?
Selling a business is in all respects, a big deal. Be sure to give it the consideration it, and you, deserve.