Many business owners that we speak to have a clear exit plan in the back of their mind.

It typically relates to a conversation they had a few years back with a larger competitor. In that conversation, the competitor said something along these lines: “If you ever decide to sell, give me a call and we will do a deal.”

From that moment on, the business owner is convinced they have a clear exit strategy – a simple button to press when the time is right to sell their business and to walk off with the downpayment on their new boat or beach house.

All Talk

The problem is that when the time is eventually right, that competitor’s promise of doing a deal often never materialises.

It’s not even a case of the parties not being able to agree on a fair price; it’s that the competitor is simply not in the market. And just like that, the exit plan they had psychologically banked on for years is gone.

Why does that so often happen?

The truth is some competitors are just talkers. They like to big note themselves as movers and shakers and dealmakers. Yet when the time comes to open their wallet, they’re nowhere to be found.

Other competitors do make statements about a buyout in good faith. However, when the phone rings, they don’t have the financial capacity to execute or their strategy has changed or the market has changed or the economy has changed or they themselves have been bought out.

Who knows?

We have seen it several times. A client engages our firm to sell their business and they provide us with the phone number of ‘David’ from ABC Co, the person who will absolutely, positively respond with a term sheet. And guess what? David and ABC Co are not in the market.

It’s a very deflating moment. It’s the moment when a business owner suddenly realises that selling their business for a good price is going to be a more involved process than they had originally anticipated.

What’s the best approach?

That’s why we have developed several pieces of basic advice for business owners thinking about an exit:

a) Take every statement from a competitor about eventually buying your business with a generous grain of salt. Talk is cheap.

b) Keep building value and ‘saleability’ in your business on the assumption that the competitor in question will never buy your business.

c) At the same time, when selling, it’s always worthwhile reaching out early in the sale process to a competitor that has indicated an interest in acquiring your business. You never know!

d) There are, however, rarely shortcuts to selling a business. It invariably requires a committed and sustained effort to get a deal over the line. Be psychologically and logistically prepared.

e) When selling a business, preparation is key, and a key part of preparation is building a rich hit list of parties to reach out to. Never rely solely on reaching out to a very narrow field.

f) Even if a competitor has indicated a past interest in acquiring your business, still develop a compelling case why your business is the perfect fit. What’s in it for them?

If you would like to see how CFSG can assist you in securing a successful business exit, we invite you to contact us.