In all my years of helping people to sell their businesses, the biggest frustration was not in finding buyers. There is never any shortage of people wanting to own good, profitable, well prepared businesses.
The real frustration always came in when the would-be owner had to find funding to enable the deal. The seller was faced with a choice:
- Look for alternative buyers while the one in hand seeks funding
- Wait for the current buyer to find his funding
I generally recommended the first option, in a low key, non threatening (to the buyer) manner. Problems arose if the buyer found out his deal was threatened, which often resulted in him losing motivation to carry through with the project. Similarly, funders insisted on exclusivity for a period while they conducted their due diligences. If, as often happened, the business passed muster, but the buyer did not, the deal failed. We were left looking for another buyer anyway, as if we had waited on option 2.
Taking the funding on offer from buyer 1’s bank often helped subsequent, more suitable buyers, if the seller stayed the course.
If you ever go into a car dealership to buy a car, as soon as you have got through all the salesman bluster, and shown your buy signal, and you have chosen your colour, seats, extras and so on, you will be ushered to the financing “department”.
Of course this is not a department of the dealership, necessarily. In reality, the “department” is an individual who is a bank clerk with a desk at a dealership. The bank has previously vetted the product and the dealership. Of principal interest to the dealership and the bank now is the viability of the customer – you.
Similarly for cars, the customer is shown a seat at the “finance desk” of the department store selling washing machines, TVs, laptops, smartphones, and so on. Things are a bit different for these goods because often the financing of the goods sold contributes significantly to the bottom line of the parent company, for reasons which have become abundantly clear over recent times.
Never the less, the metaphor(ish) holds: Goods and services stay sold if the funding is easy to come by. The funding is product approved in advance by the funder, subject only to a suitable buyer.
So why are business sales not pre-approved for funding?
Well they are, and they can be. It is not as simple as the process of a bank getting into bed with a car dealership group, but it can be done.
Our PrepareYourBusinessForSale™ initiative has been expanded into its obvious next step… being “PREPAIRED”. It is a process which takes time and is not easy to wedge into a fixed algorithm, given the complex differences between different businesses. But a guided and considered approach can achieve remarkably rewarding results.
Speak to possible funders of your exit plan well in advance, and get a feel for what they are going to require in
- Your business
- The new owner
- The deal structure
- The deal value
Keep in mind that you will have to work with your funder in placing the correct new owner, when the time comes.
“I am just so sick of the uncertainty. My business is really doing well, and it has some good years ahead of it, so it is time to get ‘Prepaired’”.