Did you know that not all business sales look the same? Or that there are in fact three distinct selling types you can use when selling a business? ActionCOACH breaks down what they are, how they work and the pros and cons of each, so you can make the best plan and get the best value for your business.
Type 1 – Financial Sale
This means selling to a financial investor who is buying your business solely based on the return it will bring them. This is the most common type of sale, but usually provides the least amount of value to you, the seller. This type of sale is undertaken often with little or no planning, which could be a pro if you absolutely needed to sell the business in a hurry. However, in this case, no plan usually means a low price. For more about how to plan to sell your business, read our previous blog about how to value a business
Type 2 – Emotional Sale
An emotional sale structure will often provide the highest value – which is ideal for you, the seller. This type of sale ignores logic, to some extent, because it is based on the buyer’s emotions and makes them ignore the data that undermines their feelings.
A great example of an emotional sale is someone buying their dream home. They walk into their dream home and fall in love before they’ve walked through every room, and they ignore that it is in a terrible area and has poor resale value! The person selling the house is lucky that this person walked in!
We can apply the same logic to selling a business. For example the buyer’s parents may have shopped there for years, they may have fond childhood memories of the brand, or simply love the feeling they get when using the products. The only problem with an emotional sale is that you have to be lucky for someone to stumble across your business with an established emotional bond. You cannot plan for it, and so it is extremely unpredictable.
Type 3 – Synergy Sale
Often the best kind of sale, a synergy sale typically produces higher value than a purely financial sale. The reason that a Synergy Sale attracts a higher value is that it involves selling to another business who can make more out of your business than you can and, as a result, values your business at a higher value, with the future in mind. Best of all, a Synergy Sale can be planned for by you, the seller.
For example, a bike parts manufacturer buys a retailer in a similar line of business. The manufacturer then sells the bike parts through the retailer, removing duplicated costs like as admin and finance. So both businesses actually become more profitable as a result of coming together.
As part of your selling plan, brainstorm who your potential buyer could be, and how to best position your company to get the most value for them in their marketplace. What sort of business might be able to get synergy from your business? What can you do to make it optimally attractive to that specific prospective buyer?
Planning on selling a business? Click here for a free one-on-one initial consultation or book in for our 6 Steps to Building a Better Business Seminar here.