Hell of a way to sell a business

Share This:

 

<>

A Hell of a Way to Sell a Business

Since starting Worldwide Business Brokers back in 2001, we’ve seen some crazy stuff but never have we seen anyone try to sell a business the way I recount in this story.

From “creative” accounting and inventory “deflation” to missing bank records and even imaginary owners, it never ceases to amaze me how some business owners can simultaneously exist in both the real world and an imaginary one.

Are you kidding me?!?

But about a month ago, I was really stunned when a novel approach to selling a business came to my attention.

A couple of guys who own a 30-year-old restaurant and bar in the Midwest of the United States announced that they were interested in selling…

…via a press release to the Local Font of Knowledge, a daily broadsheet with a circulation of roughly 27,000.

That’s right; a press release. What could possibly go wrong?

 

Well, a couple of things, actually; both long term and short – and the short term ones erupted immediately.

Let’s look at the long term problems first.

Long Term Issues

One of the owners was a founder of the business, in it from the beginning; meaning he has worked in this restaurant/bar for the past 30 years. The other owner started as a manager 20 years ago before buying in. While both appear to have extensive experience selling beer, neither has any experience selling businesses. (And to paraphrase the brilliant philosopher, Chris Rock, “Nobody has to sell you a beer. Beer sells itself. I’ve never heard a bartender say, “How’m I gonna get rid of all this beer?”)

It’s true that some stuff  – beer, for instance – “sells itself” but businesses do not. If you want to sell a business you need somebody that knows how. Using a press release to a broadsheet with a modest circulation in an industry with declining numbers is a sure sign that the owners of the business have no idea what the heck they’re doing.

_____________________________________________________________________________

Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.

Become a Professional Business Broker…

Think about this: if a press release is the extent of the marketing being done, how many of the 27,000 people that the paper supposedly reaches do you think will ever see the announcement? And how many of them are buyers??

The announcement’s not on the front page – where people buying their morning coffee and a donut at the local 7-11 might see it when passing the newspaper rack as they make their way to the cashier – if it has a catchy headline and a placement above the fold! (FAT CHANCE!)

It’s not on the first page of the sports section – where the mechanics at the local tire company automatically go to see if their team has the proverbial snowball’s chance in hell of making the playoffs!

No. At best, it’s buried at the bottom of the “business” section, a section that is now so small in most local papers that it has been reduced to two pages, half of which is comprised of legal ads announcing foreclosures, yard sales dates and pleas for the return of missing cats named Ploppy.

How many of the 27,000 people the paper supposedly reaches will actually see the announcement? And how many of them do you think will actually be interested buying a restaurant – or ANY business, for that matter? And of that tiny minority, how many do you think will have the dough required to do the deal and, most importantly, the support of their spouse to pull the proverbial trigger and blow a whopping hole in the family retirement fund?

My guess is, if any, it will number in the single digits.

Why is a Professional Business Broker Needed?

Selling a business requires much more than, in the immortal words of our heroes, “…getting the word out”.

There’s marketing to be done. There’s a valuation to be established. There’s a marking package to be developed. There’s a value that the current owners have in mind that must be addressed – and somehow reconciled with the actual market value of the business because the two values are almost always so unlike one another as to reside in different galaxies.

Does anyone involved have a list of potential buyers? Of course not. But a professional business broker does!

Does anyone involved have any idea what the business might be worth? Of course not. But a professional business broker does!

Does anyone involved have any clue as to how best to structure a deal so that the sellers come away with the best outcome? Of course not, but…! (This is getting monotonous.)

All of this is part of the long term downside. And the owners can probably survive this ridiculous fantasy but it will result in an epic waste of time and aggravation, will most likely have a negative impact on the business and is extremely unlikely to be successful. Their effort to find a buyer will likely take years – if they ever find one at all. And the way they’ve chosen to go about this poses a serious risk to the business – as I herewith explain.

The Short Term

Now, the above is just a brief list of the myriad problems with this approach – the long term downside. But the short term downside is immediate, monumental and possibly fatal.

The press release was published on a Monday. Within 30 hours – 30 HOURS! – the restaurant owners were forced to post the following on the business’ FacePlant page:

“It’s amazing how rumors like to spread…
Yes, we are for sale. That’s what happens in business sometimes. BUT…No, and I repeat,
NO, WE ARE NOT CLOSING DOWN.
We plan to keep running our bar as usual everyday till the day that we get the right offer to sell. We simply are looking to the future and realize that we can’t do this forever.”

This blog and our podcast have LONG extolled the urgent need for confidentiality in the sale of a business. This is one of the reasons why.

If the customers of any business think that that business is closing, they will find other businesses to turn to. A press release – or any story in any media that can be construed – even remotely – to mean that a business is closing – will almost guaranty that sales begin to fall immediately. And right after that, the value of the business will follow sales off the cliff.

There is no way to overstate the importance of confidentiality when selling a business.

The Bottom Line

Like selling a house, if you want the highest price for a business in the shortest amount of time, with the least amount of aggravation, while you can focus on keeping the business in tip top desirable shape, hire the talent to make it happen.

_____________________________________________________________________________

Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.

Become a Professional Business Broker…

If you have any questions, comments or feedback on this topic – or any topic related to business – I want to hear from you. Put them in the Comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.

I’ll be back with you again next Monday. In the meantime, I hope you have a profitable week!

Joe

#business #businessacquisition #sellabusiness #becomeabusinessbroker #businessbrokering #businessvaluation #MergersandAcquisitions

The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 600 in the world. He can be reached at joe@WorldwideBusinessBlog.com

Share This:

Leave a Reply

FacebookTwitterLinkedInRequest InformationContact