3 Benefits of Selling Your Business to the Competition
If you’re planning on selling your business, you will typically receive offers from two types of buyers: financial buyers like private equity (PE) firms, and strategic buyers who could benefit from merging with your business, like a competitor.
Financial Buyers or Strategic Buyers?
Private equity firms, though, although they are awash with cash, help push up your business’ valuation, and are a good alternative to going public to raise funds for your business, can also break your heart.
Since they are buying your business mainly for the money — the potential returns it could get them from their investment in it — they will not care about the culture you have built up and the relationships you’ve cultivated among your employees, customers, and suppliers, as much as they will care about whether any of these bring them the faster returns they want. So, when business decisions come down to a choice between money or the well-being of your business, money would be their prime consideration.
Another option to consider, then, would be strategic buyers, who are usually already in your market or industry and could gain from merging with your business, like a competitor.
A merger is a business strategy to join forces with another company and operate as one legal entity. Usually, companies that agree to merge are equal in size and scale of operations. They decide to merge to gain access to a larger customer base and market, reduce competition in the industry and move towards monopoly status, and grow their economies of scale.
A business merger is different from an acquisition, which is where one company takes over another company, usually aggressively. In business mergers, both companies usually stand to gain from their combining together.
Competition Interested in Your Business
Competitors who are interested in your business could be of three (3) types: your direct competitors, indirect competitors, or near competitors.
Direct competitors serve the same market and customers as you do. Their interest could involve quick expansion to more locations in your area or entering a market sector they have not previously served but which you already do.
Indirect competitors are those who serve a bit of your market and could stand to gain more if they combined with your business so they can serve more by capitalizing on your business strengths.
Near competitors serve a different sector of the same market as your business does and could be interested in your business to add value to their existing market, as well as expanding their serviced sectors to include yours.
Benefits of Selling to Your Competition
Selling to your competition through a business merger can provide you with the following benefits:
- Quick exit for you, since they already know and understand your business and industry. You don’t have to stay around for long to guide them in the transition as they are already familiar with the nuances of running a business like yours. You can move on now with your other plans for your life, even as you leave your business knowing that it’s with people who know it and care for it.
- Quick cash for you, since these competitors are usually likely well-capitalized, with strong banking relationships, and ready cash to pay you (otherwise, why would they even be interested in buying yours?). They see value in your business and the benefits they could potentially gain from acquiring your business so they would be ready to pay upfront and get on with their strategic plans for growth and expansion.
- Your business’ strengths can live on, even after you’re out of it. Your business represents your dreams and goals where you put all of your mind, heart, spirit, attention, and energies into. So, when you sell your business to a competitor who probably shares the same dreams and goals you have for the market you are serving, they can leverage your business’ strengths further to add value to their own business. Therefore, a part of you lives on in the merged businesses long after you’re not involved in it anymore.
Before You Sell to Your Competition
However, there are also considerations to pay attention to before deciding to sell to your competition, primarily involving your sharing a lot of business information — including trade secrets and financial information — with a potential buyer who’s a competitor. If they are unscrupulous and the deal doesn’t fall through, they could walk away with a lot of your business information which they can use against you. This can both be financially and emotionally devastating to you.
How do you prevent this? Hire a good, experienced business broker who can protect you and your business in the process.
What Good Business Brokers Can Do for You
A good business broker and its team, like Xcllusive Business Sales, can assist you before, during, and after the sale of your business, giving you peace of mind and security all throughout the process.
Before the sale, we can help you with valuing your business right from a realistic and comprehensive market perspective, since we have access to business sales databases and market connections. We have been doing this since 2004 when we first started.
Xcllusive Business Sales also has different departments dedicated to different tasks in the business sales process. We have a separate administrative department for addressing all the documentation and paperwork processing, so the business broker agent assigned to you can focus solely on selling your company to the best buyer. This means that you can also focus on continuing to operate your business well and not be bothered by the demands of selling it.
During the sale, we can ensure confidentiality to protect you from bad buyers, even as we help you find good buyers through our quality database, and market your business well in the business sales industry. You can avail of a free consultation, where we get to know each other better, even as it gives us a better understanding of your business, so we can find the best strategic fit for you. We even provide you with a triple guarantee of a 7-day exit agreement, finding your business buyer within 120 days, and a 110% money-back guarantee.
When you negotiate with potential buyers who are also competitors, our team of experienced and expert professionals assists you so you don’t go to the negotiating table alone, facing a competitor who might already have a negotiating team of their own.
After the sale, we also assist you with the changeover demands. If your buyer has a financial shortfall to buy your business, we even help with connecting them to our industry network of finance companies to help them raise funds to buy your business.
Sell your business with certainty and leave your legacy intact — yes, even while selling it to competitors. Sign up for your free consultation with us now.