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Selling Your Business, Part 1: Understand Your Competition

The number of owners interested in selling their business has increased significantly in recent years. As baby boomers near retirement, more and more are considering options to transition out of their companies. A sale is often the best option, but it can be a confusing and seemingly daunting process to someone who for years has had their head down focused on their business.

If you are considering selling your business, to maximize your effort you need to prepare before you market your company for sale. One of the things you need to do is evaluate your company relative to your closest competitors. A buyer will evaluate your business within the context of the market in which you compete, so you might as well get a jump on that process.

Knowing Your Competition

Three things to know before you start this evaluation. First, you likely do not have just one competitor. Second, your competition may vary depending on particular products or services. Third, you have both direct and indirect competitors. A direct competitor is one that offers the same product or service in pretty much the same manner you do. For example, you own a PR agency that services the music industry, then your direct competition are other PR agencies that focus on the music business. Your indirect competition are the businesses that offers similar products or services, but maybe not the same way you do. Say there’s a large advertising agency that offers a range of marketing services for the music industry, with PR being just one of those services. You would consider that agency your indirect competition.

What You Should Know About Competitors Before You Sell

You can use information about your competition to define your competitive advantages, and you should accentuate those advantages during the sales process. In fact, I like to refer to these competitive advantages as “intangible assets.” This is not to be confused with the accounting terminology, but thinking like this helps you define and differentiate your product/service.

Knowing your business’s “intangible assets” requires understanding certain aspects of your competitors. Ask questions like:

  •       Pricing. Where does your business fall in comparison to competition?
  •       Strengths. Why do customers like going to the other business over yours?
  •       Weaknesses. Can you make one of their shortcomings one of your strengths?
  •       Product Offerings. How do their product offerings compare to yours?

 Understanding how your company compares with competitive businesses will ultimately impact your exit alternatives. Whether that works to your advantage or disadvantage is up to you. Our job is to help good companies make great exits. Learn more about the exit process by contacting the Tennessee Valley Group, Inc.

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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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