When you’re preparing to sell your business, it’s essential to realize you’re not merely selling your past successes; you’re selling a documented and believable future. Buyers aren’t purchasing what you’ve already accomplished; they’re investing in what they believe your business can become. This crucial distinction shapes the entire sales approach. Your role as the seller is to explain and frame the past effectively in a way that convincingly illustrates potential future growth.
However, many sellers mistakenly believe it’s advantageous to volunteer a price upfront. Conventional wisdom strongly advises against this. As the well-known negotiating adage goes, “He who mentions price first loses.” This idea isn’t just theoretical—it’s rooted deeply in human psychology and bargaining dynamics. The moment a seller suggests a price, that price effectively becomes the ceiling for the negotiation. It almost never goes up from there, significantly limiting your negotiation power and potentially leaving money on the table.
Think of it this way: If a buyer believes your business is worth $1 million, but you propose an initial price of $800,000, you’ll likely never achieve a penny more than your initial offer. You inadvertently capped your maximum profit potential by simply speaking first. This makes it imperative to let the buyer lead the price conversation after you’ve thoroughly communicated the value and potential of your business.
Furthermore, understanding the type of buyer interested in your business can dramatically influence how you present your company’s value. Sometimes the buyer isn’t purchasing your revenue or your assets directly; they may be strategic buyers interested in acquiring something entirely different—such as your customer list, technology, market positioning, or even a talented team. Management guru Peter Drucker famously stated,
“The buyer rarely buys what the seller thinks he’s selling.”
This insight underscores the importance of understanding buyer motivation.
Therefore, a strategic buyer might value aspects of your business you consider secondary or even trivial. For instance, a buyer might value your extensive client database, proprietary software, or even a strategic market position more than your physical assets or current cash flow. Hence, it’s beneficial to ask open-ended questions to discover what the buyer truly values and ensure you’re highlighting these elements during discussions.
As you approach negotiations, your focus should remain on thoroughly articulating the strength of your business model, competitive advantages, industry trends, and growth opportunities. Provide buyers with documented evidence—clear financial statements, detailed customer analysis, and growth projections supported by market research. Sites like BizBuySell.com and BusinessBroker.net offer excellent resources and guidance on how to properly document your business and prepare for a sale.
Ultimately, your objective is clear: Explain the past with precision, document future potential convincingly, and then step back to let the buyer lead with price. This approach preserves your leverage and positions you to maximize the sale price of your business.
