Article Summary of 8 Tips For Selling Your Business To A Competitor:
- Pros and Cons of Selling Your Business to a Competitor
- Eight tips for how to go about selling to your competitor
- A Useful Option
8 Tips For Selling Your Business To A Competitor
I’m going to guess you don’t want to be reading an article about selling your business to a competitor. I mean, deciding to sell is a tough decision and on the surface, selling your business to a competitor may be an even worse feeling.
But I’ll tell you a secret I learned long ago: A wise business owner considers every option when looking to exit — and does so without emotion.
If it’s time to sell, then selling your business to a competitor should be an option that you seriously consider. It might not be ideal, but if you need to exit, then you need to exit.
“Waiting for perfect is never as smart as making progress.” — Seth Godin, Author
I like this quote from Seth. It’s one of my favorite quotes for entrepreneurs, and something I live by. Selling to your competition may not, on the surface, seem ideal, but it can be progress, especially if you are ready to move on to what’s next.
I want to turn to some of the advantages and disadvantages of selling your business to a competitor.
Pros and Cons of Selling Your Business to a Competitor
In general, selling to a competitor offers a number of opportunities and threats. Let’s take a look at some of the pros and cons of selling to a competitor.
Pros of Selling Your Business To A Competitor:
- Qualified buyer
- Knowledge of how to run your business
- Interested in purchasing some or all of the assets of a business
- Potential for a higher sales price versus a third-party buyer
- Quicker access to financing as they are a proven player in the industry
Your competitors have knowledge of the industry, experience running a business, and are usually able to secure financing for a sale. This can mean a relatively quick deal at a good price.
Cons of Selling Your Business To A Competitor:
- May use a sale to try to steal company secrets
- Not always interested in maintaining the legacy of a business
- Just may want to eliminate competition
- May just strip the assets
- No guarantee that current customers or employees will be taken care of
Make sure you find out exactly why your competitor wants to buy your business. You’ll need to dig to understand what their goal is, and if that matches what you want.
Ready to sell your business to a competitor?
I’ve bought, sold, and operated many businesses in my career. I want to tell you what I’ve learned from buying from and selling to competitors.
Here are eight tips for how to go about selling to your competitor.
1: Get a proper valuation
If you are going to sell to your competitor, you need to understand exactly how much your business is worth. Negotiations are going to be stiff because your competitor knows your industry, knows your business.
2: Get a Non-Disclosure Agreement
I can’t say this enough. You may think you know your competitor’s game plan, but until the sale is closed, you don’t. An NDA will make sure your business secrets stay secret. Wait until the purchase agreement is signed before sharing sensitive information like financial data or customer lists. Make sure you protect your business from an unscrupulous rival.
3: Keep in control of the deal
Your competition probably knows your business well. This can give them leverage in the deal. Don’t let them take control of the deal. Be ready to walk away.
4: Ask the right questions
Why is your competitor interested in buying your company? What do they plan to do with the business after the sale? What about important elements, like your top customers and employees? Dig in and understand what is motivating the sale. Make sure the sale is in line with what you want for your business, for your legacy.
5: Don’t forget about current operations
A sale, including due diligence, can really dominate a business owner’s time, attention, and energy. Make sure the business continues to run over the course of the sale. I’ve seen business owners who get so involved with a sale that the business falls apart, which ultimately reduces the sale price.
6: Get everything in order
Get your business ready to sell so that the sale can go well. I can’t say this enough. You’ll need to make sure the business can run during the sale, and that you have everything you need for a sale. Use a checklist to keep organized and on top of everything.
7: Understand your competitor
Any businessman worth his salt understands the competition. This is even more important when you are considering selling to your rival. Ask around. Find out how your business would fit into their plans.
8: Take your time
Don’t rush the sale. Unless you are under the gun, you don’t have to take the first offer that comes your way. Your rival has spent years competing against you. Don’t let them low-ball you. Take your time and negotiate hard. It’s your business and legacy at stake.
A Useful Option — But Be Prepared
Selling your business to a competitor can work, but there are many things you need to be ready for. Make sure the sale meets your goals and will maintain the legacy you built. Be ready to walk away if the sale isn’t what you want. If you need different sales options, contact me.