Common Myths When Selling Your Company

Many people hesitate when contemplating the sale of their company. Without first hand experience, many business owners buy into numerous myths or misconceptions related to selling a company. Consider some of the more well known myths and their corresponding clarifications.

Jobs Are Jeopardized

The most common belief when selling a company is that the jobs of employees will be lost under the new employer. This is far from the truth. Financial and strategic buyers, in fact, do not like to disturb the inner workings of a company at all. Fiddling with a company will absorb resources and substituting a large employee force is not an easy option. Furthermore, a company’s existing staff is experienced in working in the various sections of the business. Buyers are unlikely to tamper with an experienced staff is and see them as a bonus rather than a liability. Therefore, jobs of the current employees of the target company are generally secure. The one exception is mediocre employees who may find that they need to pick up the pace to ensure longevity.

All or Nothing

Many business owners believe that need to sell all of their company or none at all. In reality, there are numerous ways to exit a company and one may decide to choose between any of them. The seller could opt for an outright sale, plan a merger, decide to go public or even sell part of the company. With such varied options available, it is imperative to be certain which exit form is most suitable to the seller. For this purpose, the seller must analyze the reason for the exit and then, in consultation with their advisor, decide upon the most appropriate course of action.

Public Knowledge

Most entrepreneurs who decide to sell their companies fear that the sale shall be public knowledge. In reality, the seller has extensive control of who receives confidential information. Most investment banks go to great lengths to keep the sale of a company under cover. The key is a strong confidentiality agreement - one that does not unduly hamper the buyer, but one that does protect the seller’s interests. The most common mistake occurs when a seller handles a transaction himself or herself. The minute a seller talks to a buyer and says his company may be for sale is the minute it becomes public knowledge. On the other hand, when an investment banker is in the loop they are able to provide blind executive summaries that protect the identity of the seller.

Selling a Company Is Simply a Matter of Finding the Right Buyer

Selling a company is not an easy job. Most who attempt it on their own experience a rude awakening. Managing a transaction is a complicated process and finding the right buyer is simply one part of it. Researching the universe of prospects, assembling the deal book, conducting the marketing outreach and managing the due diligence process are all areas that require detailed and professional attention.

Any Buyer Will Do
When seeking an exit, many sellers believe any buyer will be suitable. Price is not the only driving force in a deal. Therefore, just any buyer is not suitable for any seller. The first step is reaching clarity on one's objectives. If you want to be satisfied post closing, you need to find buyers that are in alignment with your desires. The more buyers you have to deal with, the greater likelihood the right buyer will come to the surface.

Even more myths concerning the sale of a business exist, but these are the most prevalent. Educating yourself on them and avoiding all misconceptions will enable you to make a sound decision concerning the sale of your business.

Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, email him or visit www.vercoradvisor.com.