Most of the Work Is Getting Rid of Buyers

Most people approach dating by trying to meet as many people as possible. I went the other way. The point was to work out quickly who it was not going to be, because the expensive part was never the first conversation. It was the three months spent finding that out slowly.

Selling a company runs on the same logic, and owners get it backwards for the same reason.

Your instinct is to find people who want the business. Acting on that instinct is what fills the next six months with meetings that go nowhere.

The job is mostly elimination. You want to identify every party who could plausibly want the business, then get rid of almost all of them quickly, while telling each one as little as you can. In a well-run sale only a handful of parties ever see the full picture of your company. That is not a failure of outreach. It is the design.

Why the instinct misleads you

Selling a company feels like selling a product, so owners reach for sales behavior: be enthusiastic, be responsive, send the information, keep everyone warm.

Every one of those is wrong here, for the same reason. A product sale is a volume game where more interest is better. A company sale is one transaction where your time is the scarce resource and your information is the thing you are protecting. Interest that will not convert is not neutral. It costs you weeks and it costs you disclosure.

The parties who respond fastest are frequently the ones with the least to do. People who buy companies for a living already have a pipeline. People who are curious have an afternoon.

What an unserious party actually looks like

They are rarely obvious, because almost nobody announces that they are browsing. The tells are structural.

They want to see the business before committing to anything. They will not put a range on paper. They ask for financial detail early and offer nothing about themselves. They have never bought a company, or have not bought one in years. Their questions are about what the business is rather than what it would be worth to them.

That last one separates a buyer from an admirer. A party seriously considering a purchase is already doing math about their own business, and their questions give it away, because they ask about the things that would change their own numbers.

The screen that costs you nothing

Before anything written goes out, a party gets a short spoken description of the business. Not the memorandum, not the financials, not the name. A few sentences: what it does, roughly how big it is, roughly where, and what kind of transaction is contemplated.

This sounds too simple to matter. It is the most efficient filter in the process, because it costs five minutes and removes a large share of the field.

A party who is wrong for the business discovers it there rather than three weeks and two meetings later. A party who is right responds differently, and you can hear it: they ask about something specific, because their mind has already moved to how it would fit.

The order matters as much as the content. Screening, then a confidentiality agreement signed and returned, then a generic summary, then the full picture, and the full picture only to the ones still standing. Each step asks the other side to give something before they get something, and each step removes people who were never going to close.

Why this is hard to do yourself

The discipline is obvious written down and very hard to hold when it is your company and your phone.

Every party who shows interest feels like progress, especially in month four, and turning one away feels like destroying something. There is also a quieter problem: it is nearly impossible to screen someone coldly while being the person who needs them to say yes. The emotional position is wrong for the job.

Then there is what you cannot see. You can eliminate the obviously unserious. You cannot tell a credible acquirer from a credible-looking one, because that distinction lives in their last three transactions, their lender relationships, and their reputation for reopening a price late, none of which are visible from where you sit.

What getting it wrong costs

Two things, and the second is the expensive one.

The first is time. The months you spend on a sale are the months a buyer is pricing. Every week spent on a party who was never going to transact comes out of running the company, and the company’s performance during the process is itself a term of the deal.

The second is information. Everything you disclose is permanent. A competitor who learns your customer concentration, your margin structure, and the name of the person who holds your largest relationship has that whether or not they ever make an offer. They did not have to lie to get it. They only had to express interest and let you do the rest.

What good looks like

A process where the number of parties falls at every stage and the quality rises. Twenty approached, eight interested, four under agreement, three that see everything, two that put a number on paper.

Those are not losses. That is the funnel working, and the two at the end exist because the eighteen before them were removed early and cheaply.

More on this: How to Tell Whether a Buyer Can Actually Pay You.

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This is what we do. Prism Edge builds the buyer universe, screens it before anything leaves the building, and runs the parties who survive against each other on a timetable, so you do not find out in month five that the most responsive party was the least likely to close. The screening is unglamorous and it is most of the value.

The full chapters on what a buyer sees and when are in The Business Sale, free to download here.