The cockpit suddenly went quiet. The pilot called air traffic control to request an immediate emergency landing, but it was too late. With no thrust and only a few hundred feet of altitude, Capt. Chesley (Sully) Sullenberger decided his only option was to ditch US Airways flight 1549 into the Hudson River.
He greased that landing back on Jan. 15, 2009, but there was no rulebook for landing an Airbus A320 on the Hudson River. Nor did he get to practice a few times with an empty plane to get the hang of it. He had 155 lives in his hands and one shot to get it right.
In a lot of ways, I think selling a business is a little like trying to land a passenger jet in a river: You’ve probably never done it before, you don’t get to practice, and there’s a lot riding on the outcome.
Here are three things I wish someone had told me about selling a business before I went through the process for the first time:
1. Find a “sell-side” intermediary
Like selling a house, you probably want someone to represent you in the sale of your business (either a business broker or a mergers and acquisition professional).
But beware: both buyers and sellers can hire intermediaries. When your broker has a “buy side” mandate, it means he or she has been hired by a buyer to find a company to purchase.
As a seller, you want to make sure your broker does the bulk of the work on the “sell side” (being hired to sell a company); otherwise you run the risk that your broker’s loyalties lie with “buy side” clients.
That can be a problem if they try to deliver your business as a gift to one of their clients without generating multiple bids for your business.
2. Seven drips till you quit
Once you have an intermediary engaged, he or she is going to work with you to develop a long list of prospective buyers. Once you agree to a list, your broker is going to contact prospective buyers to try and get them interested in a conversation about buying your company.
Just like a sales rep, your broker may try to call a prospect once or twice and then give up after the third time if his or her calls have not been returned. The broker will then tell you “they’re not interested.”
But there could be many reasons a phone call goes unreturned, so the old sales adage “seven drips before you quit” is apropos here. Make sure your broker tries a prospective buyer seven different times before writing them off the list.
3. Answering the question
At some point in the process of selling your business, a prospective buyer will ask you, often casually, “Why do you want to sell your business?”
These eight seemingly innocuous words have derailed more deals than any other.
Obviously you don’t want to lie, but there is a right and a wrong way to answer the question.
Answers like “I want to slow down a bit” or “I want to travel” or “We’ve got a child on the way and I want to spend more time at home” communicate to the buyer you plan on winding down when he or she takes over. What buyers really wants to hear is your intention to help them realize the potential locked inside your business.
Here are some suggested responses based on your age.
If you’re under 40, you clearly aren’t ready to “retire,” so you need to communicate that you see an upside in merging your business with theirs: “In order for us to get to the next level, we need to find a partner with more [insert sales people, distribution, geographic reach, capital or whatever the partner brings to the table].”
If you’re between 40 and 55, most people will understand the need to shore up your personal balance sheet: “I’ve reached a time in my life where I want to create some liquidity for the value I’ve created so far, and, at the same time, find a partner who can help us get to the next level.”
If you’re over 55, you can start to talk about retirement, but you want to make sure you communicate that you still have lots of energy and passion for your business. “I’m at a stage where I need to start thinking about retirement. It’s a long way off yet, but I want to be pro-active.”
Good luck navigating your own smooth landing and let us know if we can help you like we helped others by calling Peter Kallai, CEO, Senior Consultant 613-795-8181.