Selling a business is often confused with selling real estate because a real estate license entitles one to sell businesses. But very few business owners want a “for sale” sign in the window, nor do they want every real estate agent or the public to know they are for sale. Public knowledge could impact customers, suppliers and employees adversely.
There are some exceptions where confidentiality is not so critical and a business can be mass marketed. Franchises would be one example. Most customers of a pizza franchise would not stop buying pizza from a store that is for sale. Assuming it is a reputable franchise, the pizza from one franchise is pretty much the same—or should be—as the next and the ownership does not matter.
The development of a marketing plan would answer questions like:
- Can we advertise the business for sale?
- How will you advertise and where?
- If we can’t advertise, how can we find buyers?
- How can confidentiality be maintained?
- Can we target specific buyers and how?
- Where would the buyer come from – local, national or international?
- What information do we need to provide buyers for the company?
- What “sales tools” will need to be developed to showcase the business?
- What price do we put on the business?
The Third Stage
Once the marketing plan is developed then the third stage begins – the implementation. Simply put, this is putting the plan into action and includes:
- Approaching targeted prospective buyers.
- Placing ads (if appropriate).
- Answering inquiries about the business.
- Interviewing buyers.
- Providing tours and a site visit.
- Reviewing letters of intent.
- Negotiating price, terms, structure, conditions, etc.
- Assisting with due diligence requests.
- Reviewing formal agreements.
- Closing the deal, etc.
This list is an oversimplification of the third stage as it typically takes 1- 1.5 years to sell a mid-market, private business. On your own, you will likely deal with many buyer prospects who initially seem interested but will back off at various points in their review. It is not uncommon to talk to hundreds of prospective buyers before a satisfactory one is found.
It is also very rare to undertake most or all of the above without assistance from your professional advisors – lawyer, accountant, intermediary/broker, etc. The time you spend in the planning and preparation stages will have a lot to do with how much you will require your professionals in the final stages of the selling process.
While it may be possible that the right buyer comes along out of the blue and offers you the right price at the right time, it is more common that a successful sale takes place when the above three stages are followed – preparation marketing planning implementation.