One Seller, Many Buyers
3 September 2007
Your business exists because it successfully sells products or services. If your service or product was neither wanted nor needed, there would no market for it, and you would be doing something else to make a living. That is a basic premise which we can all appreciate. If I were to tell you that selling a business really is not very different to selling those products or services, you may be forgiven for wanting to shoot me down. But you'd be wrong. Sure, the time scales are very different, but the basic concept remains the same:
The seller presents an item at a price, the buyer looks at it, asks some questions, does some sums, makes a decision, and either purchases the item or moves on. It's more complicated than that of course, because to be successful in a retail environment you need to be offering many items to several buyers - something we all understand and accept. The analogy breaks down further when a business seller offers his single business to a single buyer at one time - a situation which would never work in a retail environment. And yet sellers of businesses persist in dealing one on one, despite the problems which arise. Is there a better way?
Going, going, GONE!
Let's expand on the introduction by looking closely at it in terms of a more specific retail situation, shall we? A customer walks into an artworks shop, and is faced with a number of shelves, offering a full range of works of art, from paintings in oil, watercolours and pastels to statuettes, carvings and ceramics. There is only one of each item. He picks up a nice colourful ceramic, turns it over in his hands, reads the artist's label espousing his outlook on life and his inspiration. The price tag seems a bit much, but the piece would look really nice on the mantelpiece. "Should I think this over before I decide? Let me see what else catches my fancy." He starts to move down the row of shelves and stands.
Just then he notices a wealthy looking woman moving down the same aisle, looking at a similar ceramic. She seems uncertain. After a moment's pause, still with her piece in her hands, she rocks back on her heel, looks down at a lower shelf, and then sideways along the shelf, as if to say "what else is there in this line?" Then she sees the piece just replaced by our first shopper. He notices that she has seen "his piece". The pressure is on, and decisions need to be made. He may find a nicer item at a better price, but perhaps he won't. What if she picks up his piece? What if, what if, what if...
So he makes a decision.
He makes the decision because he has to. The options were clear cut and absolute:
Leave the ceramic and perhaps lose it to another buyer, or
Buy the ceramic.
If you have ever taken time out to attend an auction, you may remember the energy generated by anxious bidders and an excited auctioneer. If you were bidding, you will never forget it. Decisions have to be made quickly, and under pressure. The efficiency of the sale is something to behold, and then everyone moves on to the next lot. The fact is that when there are several buyers all interested in the same article, things happen, and every one knows where they stand.
The market for businesses should work in the same way There are hundreds of buyers looking at all the businesses that are on the market at any one time. (I know this because we have signed non disclosure agreements with 725 of them) Their existence, and the knowledge of each other's existence creates a nervous energy in the market place. Buyers will constantly ask us how many other buyers are looking at the business. Sometimes we schedule them within an hour of each other, just to create some urgency. The result is that serious buyers ask questions, do their homework and make decisions.
Contrast that with a seller dealing with one buyer in a deal which has not surprisingly dragged on for months and months.
On a number of occasions we have been asked to help negotiate a deal involving only one buyer. We now only accept this mandate on the condition that we are allowed to market the deal more widely, still on the same level of confidentiality, of course. A single buyer who knows he is the only prospect, will abuse the seller in the most imaginative ways, simply because he can. There is no urgency to raise funds, commit or move in. At the last minute, he will almost certainly change the conditions, the price or even his mind. Sensing the frustration of the seller, and smelling the fear, he will push home his advantage to well beyond the pale. The failure rate on one to one deals is unacceptably high.
Cheers
Mark Corke
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