Previous articles have discussed the importance of having a good reason for selling your business, getting the business ready for sale, setting the right asking price, taking your business to market and buyer acquisition financing. In this article, we will share some advice on how to successfully hold the first face-to-face meeting with a prospective buyer of the business.
The meeting with a prospect is extremely important. It’s your chance to put the prospect at ease and show off the business in its best light.
You will probably want to schedule the visit after hours so as not to arouse any suspicions among your employees. Or, you can schedule the meeting in your broker’s office if for some reason you don’t want to host it in your business. However, I think it best, if possible, to hold the meeting at your location. It gives the prospect a better feel for your operation. If you are using a business broker, he will arrive with the prospect, make the introductions and facilitate the meeting.
The first meeting is sort of a “look see” for both parties. The prospect is checking out you and the business while you are sizing him up. It’s important to remain cordial and open.
The ideal meeting will go something like this:
- First, you welcome the prospect into your office and make sure everyone has a chair and is comfortable. (Of course, it goes without saying that you have cleaned up the place and thrown away all of the old Dominoes Pizza lunch boxes!)
- It’s usually best after the initial get acquainted chitchat, to give the prospect a brief history of your business and a succinct description of your current operation. (You might want to even practice this presentation to make sure you cover the important points without rambling. If you’re using a broker, he will be with you and will help guide the meeting.)
- Remain friendly and informal, call the prospect by name often, and ask periodically if the prospect has any questions. Answer any questions openly and honestly.
- Be enthusiastic. Point out how much fun you’ve had running the business. Let the prospect hear and feel how he could experience the same enjoyment you have.
- As the meeting in your office winds down, offer the prospect a tour of your facility. Give this tour some thought beforehand, so that you can address the points that you want to during the walk-thru. Point out anything that will help clarify any points you make in the meeting in your office.
- As the meeting ends, you say something like this, “Well thanks for coming out and taking a look. You’ll probably have some additional questions, so don’t hesitate to get back in touch with me (or Mr. Broker if you’re using one). I know this will be a big decision for you and we have nothing to hide, so just let me know what I can do to assist you with the process.” Put these thoughts into your own words and they will leave a favorable impression in the prospect’s mind.
From the “school of hard knocks,” I can also give you some advice on things you DON’T want to do in the initial meeting with a prospect:
- Don’t overcomplicate your business. Simplify it. Don’t make it sound like the management of the company is so specialized that only a brain surgeon can do it. I’m being facetious of course, but be careful not to scare off the prospect by planting the doubt in his mind that he would not be capable of running your business.
- Don’t hide any problems. If there are any problems with the business, get them out up front. There is never a better time to get any problems out on the table than in the meeting. (See discussion below.)
- In the initial meeting, it’s usually best to stay away from price and terms. If the prospect brings it up, just say, “My broker here has all of that information and if your will, get with him on that later.”
The importance of getting any problems out in the open up front cannot be overemphasized. It’s partly a psychological issue. If you bring up a problem in the beginning and discuss it openly, the importance of that problem is minimized in the prospect’s mind, compared to having it pop up unexpectedly later in the process.
For example, let’s say there is a tax lien against your business for unpaid payroll withholding taxes. If you bring it up initially by saying something like, “By the way, I do want to mention for the sake of being completely open and honest that we have a tax lien against the business which is being taken care of (or which will be taken care of at closing) so that you will buy all of the assets of the business free and clear without any liens or other encumbrances.”
When you mention it like this, you win points for honesty and openness and it minimizes the problem. I’ve seen many transactions fall apart when such problems are not disclosed and are later discovered by the prospect. When discovered later – as they always are – the problem will usually “torpedo” the transaction.
This is such an important point that it bears repeating: DON’T HIDE ANY PROBLEMS. TALK ABOUT THEM IN THE BEGINNING!
Now that I’ve been overly redundant, let’s move on. The next article will discuss how to handle written offers to purchase the business.
For further reading, here are additional related articles:
- How to Use Valuation Guidelines to Estimate the Value of a Business
- Seven Negotiating Rules When Buying or Selling a Business
- Here’s How to Compute the “Discretionary Earnings” of a Business
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