Don't Jump! Why the first offer for your company may not be the best offer.

Don't Jump!

When selling your business, one of the most exciting moments is getting that first offer! Especially if the buyer’s offer exceeds your expectations. What I've found over the years is that the first offer is rarely the best option for the seller, their employees, and the company.


When I sold one of my first businesses, I didn't have an exit plan. We were growing fast, and an offer came from a public company. I was thrilled. On the one hand, they would bring the financial strength we needed to expand internationally. On the other hand, I was terrified that if I didn't jump at the buyer's offer, they would disappear. I was also worried that my competitors would get wind that I was selling and go after my clients. If I turned down that first offer, would another offer come along? Not having an exit plan led me to jump at the first offer because I felt like I had to sell right away. I was sure the buyer was the best fit, and we didn't want anyone to know about the sale. I feared more bids would open us up to market exposure. We sold and I found myself regretting that sale because I wasn’t truly ready to give up the company.


A common mistake we see many sellers make is putting their hopes into a single buyer. Focusing on a single buyer can cause sellers to tune out other possible buyers—especially if they expect that one buyer will make an offer close to their desired sale amount. In most cases they aren’t in-tune with their reasons for selling and their primary focus is only on the financial aspect of the sale. Understanding your reasons for selling and have a plan in place is key to keep you from jumping at the first offer that may not be the right offer.


An Exit Strategy Leads to a Better Sale

Understanding your reasons for selling and identifying the number you hope to achieve when you sell well in advance will create a better outcome. Even if you're not ready to sell today, having a well-defined exit plan will help you guide your business's growth so that you're always moving towards your target number, target date, and desired buyer. Your exit plan should be developed early and reviewed frequently, along with your business valuation. It also helps you assess offers logically before you jump into a sale that isn’t a good fit.


There are three crucial questions that you want clear answers to before you enter the sales process.

1. Is the sale right for my customers?

- Will a sale bring my customers more products and services?

- Will a sale bring a buyer who can improve technology, manufacturing, or other processes to improve service levels?

- Will a new buyer have customers that also want your products and services?


Answering the question, “Is the sale right for my customers?” will keep you from selling due to short-term issues, like having a bad year, losing a significant account, or a new competitor entering the market. These are problems that can be solved by revisiting your marketing strategy or recruiting a new salesperson, not a reason for selling.

2. Is the sale right for company growth and my employees?

- Will a buyer bring new opportunities for employee to grow in their roles?

- Will a buyer offer enriched benefits that may improve employee lives?

- Will a buyer move your company out of a stagnant phase?

- Will a new buyer have the financial strength to help the company expand geographically or in other ways?


A stagnant period in your business can affect morale, but being stagnant isn't necessarily a reason to sell. Nor is it the right time to look for a buyer. A realistic growth plan can energize a company and improve its desirability to a potential buyer. If you need growth, consider a financial partner. Perhaps an adjustment to meet your goals that doesn't involve selling can lead to a better sale when you are ready to sell.

3. Is the sale right for me?

I look at selling a company much like investing in the market. I ask myself, "how much of a return is enough? What gain will make me happy? What is a fair deal for the buyer?" If I’m considering an offer, I pressure test it against my exit plan and assess personal risk vs. personal reward. This test helps decide whether to move forward with the sales process. I put on a "buyer's hat," look at my business from a buyer's perspective and ask, "Would I invest in this company?" If the answer is yes, then revisit your personal reasons for selling. Do you want to retire? If so, it's maybe time to sell. If you still love what you're doing, then perhaps it's not time to sell.


Getting an unexpected offer to buy the company you built from the ground up is exhilarating. It's hard not to take the offer and start focusing on your bucket list. Before you sign on the dotted line and start your world cruise, spend time reviewing the reasons why you want to sell, the optimum buyer profile, and your desired timeline. Now is the time to be honest with yourself. Beyond financial gains, does the buyer and their offer align your reasons to sell and timeline? If it doesn't, and here's the most challenging part of the process, you may want to pass on that offer.


Jumping at the first offer or selling for the wrong reasons may cause you to feel regrets once the sale documents are signed. Selling a business isn't like selling a car. You can sell one vehicle and turn around and buy another just like it. However, if you sell your business and then change your mind about the sale, getting it back is really difficult. So, if you sell without thinking through the reasons why you're selling, you miss opportunities and take an action that can't be undone.


This brings us back to the importance of having an exit plan regardless of where you are in owning your company, whether you're a new business owner or ready to hit the links. Specifically, an exit strategy will keep you from experiencing emotional regrets while transitioning out of your business by:


1. Keeping those who aren't ready to sell from selling or jumping at the first offer

2. Provide a growth compass and personal/business philosophy.

3. Provide sellers with strong negotiation points based on their personal goals for selling


Your exit strategy prepares you to react to buyers in a way that positions your company in the best way to reap the rewards of your efforts, optimizes the best situation for your sale, and helps you develop a sale that leaves you with no regrets.


Getting an offer on your business is one of the best days of owning a business. Without an exit plan to guide your decision-making process, it could turn out to be the worst day of your life. So instead of jumping at the first offer, assess the sale against your exit plan and prepare for one of the best days of your life.


Do You Need An Exit Plan? One easy way to get started is by downloading this free guide, Key Questions When Planning Your Business Exit Planning, which goes deeper into the four questions. Many firms can write an exit plan, but be sure you're working with one that's been there, walked in those shoes, and had the regrets. Read my story of successes and pitfalls in selling and buying businesses, No Regrets, How to Exit Your Business Emotionally and Financially Strong. You'll learn from some of the bumps I navigated and why we're passionate about helping business owners plan for a successful exit so they can enjoy their next chapter—with no regrets!

Paul Niccum is a Business Strategist and author of No Regrets, How to Grow and Then Exit Your Business, Emotionally and Financially Strong! and GrowNOW! Your Fast Path to Growth.

After building six businesses and selling numerous companies to Fortune 100 and Fortune 500 companies, Paradise Capital CEO Paul Niccum has faced the same fears and emotional concerns that all sellers face. He's both a seller and a buyer—Paul has also acquired eight businesses for his own companies and has been involved in the sale of over 100 companies during his career.

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