Short Answer – No!
The more articulate answer is to carefully explain why it is always ill-advised for a business owner to strive to sell their own business.
A good analogy would be to ask if a fine doctor could effectively run a pharmaceutical laboratory? No, that would be outside of his/her skill sets and experience.
It is the exact same paradigm with a business owner striving to perform mergers and acquisitions (M&A) techniques. You could be a brilliant business owner and also an exceptional financial manager but that still does not prepare or equip you for mergers and acquisitions activities.
M&A activities are a very specific and unique set of skills which are built over years and years of actual transactional experience. It requires excellent listening skills, objectivity, savvy, astute negotiating skills and a macroscopic view over the entire transactional process and all of the participants.
The main reasons a business owner should not attempt to sell his/her own business are:
Lack of Experience
This is more than likely the biggest economic transaction of the seller’s life. This outcome is far too important to venture into it with little or no M&A experience. It is far better to engage a specialist with a high degree of professionalism and M&A experience to lead the offering. A key goal is to ensure that you do not have seller’s remorse. You do not want to put yourself in a position where you could be blaming yourself for the rest of your life for a poor outcome.
Additionally, business owners are not market makers. Consequently, they tend to identify one or two potential buyers and think that is sufficient. A strong well-run offering should involve between 50 and 100 buyers if conducted effectively.
Lack of Objectivity
It is literally impossible for a business owner to maintain objectivity throughout a scrutinizing evaluation and valuation of their company. Owners have poured their heart and soul (sweat equity) into their company for years or decades. Their company is most often called “their baby”. They should be extraordinarily proud of what they accomplished.
Conversely, they see every aspect of their company through their proud owner (founder, developer, creator, operator) lens. That is only natural. However, the topic at hand is separating the company from the owner. The decision to sell is a very emotional and traumatic decision for many owners. Attempting to lead the sale is ten times more emotional than deciding to sell and is a really bad idea.
Too Much Emotion
An offering from start to finish is a grueling process. There are a lot of people involved and a lot of conflicting agendas. During a rigorous offering there could easily be over 1,000 emails and countless meetings, document requests and follow ups. It is a rollercoaster of emotions for all involved, but especially for the seller. They are just too close to the company. It is not a one-dimensional process where a seller touts the 18 favorable things about their company and the buyer agrees with them and offers the price that the seller is seeking.
The buyer has two agendas. Their first agenda is to do a very rigorous review and analysis (due diligence) to determine if the company is fairly and completely represented. Their second agenda is to acquire the company at the very lowest price possible. Most sellers want to share the least amount of information possible unless they have a strong advisor that encourages and requires full disclosure.
Savvy buyers will strive to identify and exploit (negotiate for price reductions) weaknesses or perceived weaknesses in the company. It does not take much at all for the seller to get highly offended during this extensive intrusive process. The standard seller response is “I don’t want to sell my company to that __________”. You can fill in the blank with any expletive or derogatory phrase that you choose. This is the stage where many deals die that should not.
It is critical for the seller to have a highly experienced representative to manage all of the vacillations of this process. The representative must be objective, steadfast and non-emotional throughout this entire process.
Lack of Buyer Respect
An experienced buyer will never respect an owner attempting to sell their own business. They are well aware of the three attributes described above. They will conclude that the seller is vulnerable and will make every effort to exploit the perceived vulnerabilities. Many try to earn the trust of unsuspecting sellers and then really exploit them not only on price but on numerous critical terms and conditions such as payment terms, representations and warranties, indemnities and post-closing conditions and obligations. Do not expose yourself and your company to these innate vulnerabilities.
Why Do Business Owners Typically Make This Representation Mistake?
- Ego – never a good predicate for any very important decision.
- Save the Commission. I always say “would you rather have 94% of 12,000,000 or 100% of 9,000,000?”
Self-Representation will cost you substantially!