I recently received a note from someone who read “Boomer Business For Sale.” They had some questions about different aspects of selling their business, and I suspect they aren’t alone, so let’s address them here. The premise of the original discussion was that there are roughly 60,000 boomers who are getting ready to retire who are also business owners, and that either someone is going to buy those businesses, or they’re going to disappear. I see this happen with increasing frequency and find it such a waste. These businesses aren’t disappearing because they’re unprofitable. They’re disappearing because they can’t find a new owner.
Recently I saw where a beloved 57-year-old butcher shop in Missoula closed. A butcher shop doesn’t stay open that long if it isn’t doing things right — yet, no buyer. If substantial numbers of these boomer-owned businesses disappear, it’ll have an impact on the towns where they live, the people they employ, the people whose businesses they buy supplies and equipment from, the accountants, bankers and attorneys they use — and the revenue that feeds into other businesses. Ideally, we (as a whole) would benefit if we could reduce the number of businesses that close rather than changing hands.
How do I find a buyer?
One of the questions I was asked was about how to market the business that’s for sale. In a word, carefully. Your first thought might be a business broker. In my experience, they should be your last resort because most of them put too many obstacles between you and the prospective buyer.
For starters, don’t put a “For Sale” sign out front. More often than not, tells people “We’re about to close”, which will give some customers the idea that they should look elsewhere before it’s too late. That’s not going to help you in the short term, and it’s not going to help whoever buys your business. If you find a buyer, they’re going to have to win some portion of that business back – and if you have a piece of the future, you’d prefer they didn’t have to do that.
You’ll encounter three types of prospective buyers. Some are buying a job and an income. While that’s fine, many of them will have little or no experience running a business. They will almost certainly want you to owner finance. While there’s nothing wrong with owner financing (in fact, it’s a great way to get your asking price), you’re going to be more concerned offering financing to someone who doesn’t know what it feels like to cut payroll checks, lose sleep over business issues, and deal with grumpy customers – while still keeping them.
Other buyers are typically looking for an investment. Not private equity, but experienced business people who want to add to their business portfolio. They own businesses for a living.
Finally, there are competitors and complimentary businesses (the ones two or three towns down the road are good candidates). An in-town candidate is OK, but revealing your sale plans to an in-town competitor can create problems.
Don’t forget competitors
Of all the competitors and complimentary businesses in your market, which of them deserve your business? Which of them are good enough to take your business on and not embarrass you? Why? If you see your best customer in the grocery store six months from now, are you going to be happy to see them, or are you going to turn and go down another aisle?
If you sell to a competitor, you want to sell to the one who isn’t going to make you change aisles. Even though the check is cleared and you’re completely uninvolved in the business, you’re part of that community, and you don’t want to be embarrassed by the buyer’s behavior.
I’d look first at investors, as well as competitors who do what you do, but not in your community. Maybe they have a similar service three towns down the road and they’re looking to grow their business. You could have an intermediary (banker/lawyer) contact them to keep your identity under wraps at first. They don’t need to know whose business it is to examine your financials – which they should ask for very early in the conversation.
We’ll get to training the new owner and more next week in part two.
Mark Riffey is an investor and advisor to small business owners. Want to learn more about Mark or ask him to write about a strategic, operations or marketing problem? See Mark’s site, contact him on LinkedIn or Twitter, or email him at [email protected].