Your Business: What Is Your Buyer Thinking?

There are several psychological barriers that can interrupt your efforts to sell your business. Being a self-aware seller is important because it can improve the odds that your sales transaction will actually be completed. However, in addition to understanding your own mind, it’s equally important to be able to put yourself in your buyer’s shoes during a potential business sale.

Why? Because if you can sense what your potential buyer is thinking—especially what they might be nervous about—you can often anticipate or respond quickly to those concerns. A calmer buyer is more likely to close a deal on terms that you’ll find favorable.

Also, qualified purchasers don’t come along every day. When you find a good one, it’s smart to hang on to them. Here are some ideas to improve your odds of doing so:

Be as transparent as possible

Many buyers are worried about making a mistake when they buy a business. Any time you withhold information or appear to be doing so, you may raise a red flag in a nervous buyer’s mind. Better to give them information as quickly as you can and be upfront about any of your company’s shortcomings. You might not wish to highlight negatives, but they will likely come out during due diligence anyway.

Be honest about past sale attempts

Have you tried to sell your company before but failed or changed your mind? Again, honesty is the best policy. Buyers are much more understanding if they know your history before they learn about it from someone else. Perhaps the timing or market conditions weren’t right for a previous sale. That doesn’t mean your current transaction will be a repeat performance.

Help them understand successors and minority owners

Give buyers detailed information about your management team and any minority shareholders—including employment agreements, compensation plans, career history and their post-sale career development potential.

These are the people your buyer will work with and who will help them retain clients over the long haul. It greatly increases buyer confidence to be familiar with their new team. Also, give your buyer direct access to your team to ask questions, gauge their loyalty and learn about things like your clients and your work processes.

Sell the sale to your successors

It can help build goodwill on both sides if you spend some time building up the positive aspects of the sale to your team. Find ways to help staff get excited about new opportunities that might be open to them and their customers after the transition. If you need to incentivize key managers or minority owners to stay on after the sale, consider doing so.

Maintain deal momentum

It’s easy for nervous buyers to let a purchase slip through their hands simply due to inaction. They may stop returning calls and emails and essentially “disappear.”

We think the best offense is for you to keep the deal moving along. Develop and meticulously follow a schedule. Postpone your vacations and business trips and work nights and weekends, if necessary, to keep the information and paperwork moving forward. The longer the deal takes to complete, the less likely it is to actually close.

Remember: The buyer is stressed out too

You may stand to earn a nice profit from your sale. However, your buyer is investing a significant sum—and it’s possibly the first time they’ve ever done a merger or acquisition. If you can, try to be a bit empathetic if your buyer seems tense or nervous.

Again, the more comfortable and confident you can help your potential buyer feel, the better your odds of closing a successful deal.

For more information about selling your company and evaluating the impact on your personal finances, don’t hesitate to contact your wealth advisor.

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