Fighting the Temptation to Oversell (Quality Sells Itself)

Selling your company can be an exciting time for an entrepreneur. It is fraught with a mix of emotion and struggle. Often because the business has been such an integral part of the entrepreneur’s life it makes it difficult for the small business owner to part with the assets he/she has worked so hard to acquire. A large part of being an entrepreneur is striking some semblance of work/life balance between the business and family. Balance is also a needed attribute when it comes time for the entrepreneur to sell the company. Balance particularly needs to be struck in the “selling” process. There is a temptation to oversell the business which is problematic for a number of reasons.

First, painting a rosier picture than reality could come back to bite you in the butt at some future point. For instance, if you tell the client one thing and the opposite happens you are certainly not building a healthy foundation of trust. There are so many nuances and issues involved in each company and industry that is important to divulge much of what is involved in your business. Certainly it is okay to leave out specific issues or customers that were one-time events, but being forthcoming will have payouts in other ways as well. For instance, what if your buyer is someone within the industry—perhaps your competition—and you are now courting him/her for a the sale of your company. With all the proper confidentially agreements in place, it is okay to open up a bit. Talk about how business has been performing for both companies and otherwise open up about problems specific to each business and perhaps the industry as a whole.

Secondly, your moral character is on the line. Being ethical is probably one of the most compelling reasons to be forthcoming on information about your business prior to a sale. For instance, if there is a regular and recurring issue or customer or problem that you avoid bringing up because you know it would shine a bad light on the company, thus reducing the chances of a higher sales price or a sale at all, most would be tempted to simply ignore it. Some would do something even worse when confronted about it: they would lie. Not a smart move. This is not a post on ethics, but it very well could be. It is sufficient to note that being ethical is as important for your future and the eventual closing price as it is for your reputation and character.

A final thought. While you should not paint too picturesque a scene for the next potential owner, it is okay to leave out quite a number of details incident to your business and some of its operations. In fact, many a transaction would have failed to complete had there been full disclosure of every and all details. You don’t have to be so specific and nit-picky on every detail involved in the business and its assets and operations, just be sure your moral compass can handle the divulging or withholding of specific details incident and important to the final sale. If you can sleep at night and look at your face in the mirror in the morning, than you are probably doing fine.

If you were looking to build value and build a lasting enterprise when you began, then you were probably in your business and your particular industry for the right reasons. Until it comes time for you to sell and walk away, it may be wise to start thinking about these types of issues now. In your operations, what can be trimmed, eliminated or improved so that the sale of your business does not leave any “excess baggage” there for potential buyers? Start taking the Japanese Kanban approach now and get your company working like a well-oiled machine so you can be prepared to sell when the time is “just right.”

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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