We’ve been discussing the actual sales process in our Building a Sellable Business series. Once you’ve assembled your team and hired a sales facilitator, you all work together towards the end. You estimate your business’s actual value. It’s now time to choose the best way to sell your business… can you make the most money by selling your company through a public auction or a private sale?
“(Some auction companies) use the high intensity of controlled chaos to drive up bid values.” – Justin GoodbreadClick to tweet
Depending on your personal preferences, your personality, and your professional team’s advice, you may choose to sell your company through a private auction.
If you’ve ever been to an auction or seen one on TV, you’ve likely seen a fast-speaking auctioneer rattling off requests for bids. At some auctions, silent and calm audience members will raise hands, fingers, or number cards to indicate their intent to purchase the item up for sale. Event planners at these types of auctions use increasingly valuable product offerings to drive up audience excitement, participation, and valuations.
In contrast, other auction venues encourage loud and sometimes raucous bidding environments. They want audience members to yell out bids and talk over other participants. In this case, event representatives hope that excessive noise and hyped-up emotions will increase excitement and participation levels. Essentially, they use the high intensity of controlled chaos to drive up bid values.
Similar to the two types of auctions I mentioned above, you have two basic ways to solicit buyer bids. On one hand, you can quietly and privately accept bids, quotes, or letters of intent from a small group of buyers. On the other hand, you can auction off your business to a large group of qualified buyers. Obviously, your goal is to get top dollar for your valuable company with terms favorable to you and to the buyer. However, your personal preferences can make a difference in whether you sell your company through a private auction or a listed sale.
There are a number of reasons why you would use an auction to sell your business.
Your M&A Advisor or investment banker may be the best sales facilitator to use if you fall into this middle market company size and decide to auction your business. Whoever you decide to use to help you sell your business, seek guidance and help. Friends, this sales process is too big a deal to “go it alone.”
A business auction won’t look like the auctions you see on TV, though. You won’t gather buyers in one room. There will be no fast-speaking auctioneer demanding bids from audience members. Buyers will not raise hands or numbers. Neither will they yell out bids. No, that’s not the type of public auction you will hold. What does the business auction look like, then? How does it work? What will you and your business sales facilitator do in this process?
So that’s the most basic way to describe the way a business auction works. It’s most likely not like auctions you’ve seen before, and it can be held publicly or privately.
On the opposite side of the business auction lies the private sale. Auctions aren’t for every seller. Therefore, there are reasons why you would sell your business in a private sale rather than through a public auction.
So where does that leave us? Well, now is the time to talk to your business broker, M&A Advisor, or investment banker. Get your team together, too. Seek guidance from those who have walked this journey with you and from the objective sales facilitator. Work together to choose the sales vehicle right for you, for your buyer, and for your company.
No matter which way you decide is the best way to sell your business, you probably already have interested buyers. You just have to figure out which particular process will get you the highest bid.
NEXT ARTICLE: Dissecting the Letter of Intent to Buy Your Business
Like I always say, life is hard. Life is fun. Life is complicated. Business can be complicated. Money doesn’t have to be. Let’s continue to make our lives, at least, financially simple.