A Rule I Learned While Dating About How Not to Sell Your Business

Though happily married for 28 years, I have some memories of my experiences dating. I’d often have friends say “I have somebody you should meet” to which I’d usually say “well, tell me about her.” If the response was “she has potential,” I’d politely decline the opportunity – run for the hills, actually.

Potential is a terrible word to use when describing a potential date, and it’s a terrible word to use when describing why someone should buy your business. When a business owner tells me “this business has potential” I have the same reaction as when someone would tell me about a girl with “potential.” I’ve come to the point that I believe “potential” is what you say when you don’t have something better to say. When the message is “this business has potential” you are really saying “I think this business could grow, I just don’t know how.”

To optimize your business valuation, don’t talk about your potential, but instead talk specifically about what you have done to grow your business. …… I did this, then this happened. I call it the “if that then this” rule. A business with a fact-based formula for growth {if you do that then this will happen} will get a higher multiple which is another way of saying the business will sell for more.

This is one reason I encourage business owners to seek the advice of a competent consultant well before putting the business up for sale. In most cases, a business needs time to find the “if this then that” formula. Trying to figure it out while marketing the business for sale usually ends up as some vague notion of “potential” which is a turn-off to a knowledgeable prospective buyer.

When I write a marketing package for a client company, I will include a section called Growth Opportunities, but I will only include specific ideas with specific plans. That way a prospective buyer has specific ideas for how the business can grow.  My “if this then that” rule is another way of projecting return-on-investment, which is the real message a prospective buyer wants to hear when evaluating your business.

So eliminate the word “potential” from your vocabulary when selling your business. Focus on the specifics of your growth plan….your wallet will thank you at closing.

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Tennessee Valley Group

Jim is an attorney (non-resident status with the Missouri Bar) and though he no longer practices law, he has read and negotiated enough legal documents to fill a cargo tanker. He has an MBA from Harvard Business School and knows how Wall Street and private equity operates. Jim is a Tennessee Supreme Court Rule 31 listed general civil mediator with tons of experience helping business owners (large and small) work through sensitive problems to achieve winning results. He is the author of "Home Run, A Pro's Guide to Selling Your Business, Seven Principles to Make Your Company Irresistible."

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