Have you ever wondered what prompts a business owner to put their company up for sale?
I put that question to the head of mid-market M&A for a Toronto-based investment bank specializing in selling companies (he requested anonymity).
1. Unsolicited bid
“Typically, a client calls us because they have been approached out of the blue by a buyer.” My banker friend went on to explain that an unsolicited advance causes a business owner to start thinking about what his or her business might be worth.
2. Health scare
I asked my contact to reveal the second most common trigger: “It’s typically a health scare,” he said. “The owner, a close friend or spouse has a health issue, which causes them to reflect on how short life really is.”
Interestingly, both of these triggers are externally generated and could lead to a hasty sale with a discounted price. In my experience, you need a proactive plan to sell your business to maximize your valuation.
For example, I’m on the advisory board of a small company based in California, and I’m writing this post on the plane on the way to our next meeting. I just read the company’s board package, and it’s trying to decide between four different growth strategies. It has outlined the possible exit options — complete with potential strategic acquirers — associated with pursuing each plan.
If you want to get the highest price for your business, don’t leave your exit planning up to somebody or something you don’t have control over.