Second to pricing, the biggest concern that sellers in a collection agency M&A transaction have is word about the sale getting out prematurely through the “rumor mill.” What if my clients find out that I am selling? If my employees find out about the sale, then they will leave me. My competitors will use it against me to steal my clients or staff. We all know the concerns and they are all valid. After all, the main value drivers of a service business are its client base and its ability to generate cash flow. If word of a sale is leaked, clients or staff may leave, causing a reduction of value.
Let’s address some of the most hyped concerns that owners raise about word getting out when contemplating the sale of a service business and some ways to minimize the risk of confidentiality breach.
I Will Lose My Main Clients If Word Gets Out About a Sale
All types of businesses sell. Small businesses sell. Large businesses sell. Struggling businesses sell. Performing businesses sell. Service businesses sell, and clients are well aware that owners of service businesses sell. It is an anticipated part of a business’s lifecycle.
Once the buyer has been identified, then the seller should consider approaching key clients to explain what’s taking place and how it will benefit them as important clients of the business. Perhaps the selling business will be merged into a larger operation with greater financial strength, advanced technological capabilities, or a deeper suite of service offerings than the selling company currently provides. The client may voice concerns which you can address through conversation, but they will appreciate your transparency and may actually welcome the sale. Ultimately, retention of key clients will be based on performance post sale and not the sale itself.
My Staff Will Leave If I Sell
Perhaps it is true that some members of your team may want to leave and the notion of a sale gives them the excuse to do so. Most likely, these employees had one foot out of the door already, regardless of your decision to sell the business. It is likely these employees are headaches of yours, either overpaid for their services or not performing well within your organization. A sale gives you or the buyer the ammunition to do the right thing for the business by dropping dead weight. Those staff members that are performing well should welcome a sale. They may see an increase in their job responsibilities, increased benefits, or a way to earn more compensation. Identify your key staff members and engage them in the sale. If done correctly, this will help provide for a smooth sale process and transition of the business to new ownership.
Selling a business can be incredibly difficult, especially if you don’t know how to address your specific concerns. An experienced advisor knows the tricks of the trade and over the years has developed his/her own battle wounds by dealing with the buyer directly. Their experience can be the difference between success, partial success, and outright failure when it comes time to sell your business.
Fortunately, Kaulkin Ginsberg can help you navigate those choppy waters. We have worked with small, mid-sized, and large privately-owned companies, Fortune 500 corporations, and financial investment firms on their collection agency M&A strategies for thirty years. Whether you’re seeking professional sell-side representation, assistance forming a partnership or joint venture, a transaction assessment, or a valuation, Kaulkin Ginsberg will guide you through the process. For more information, or to schedule a confidential discussion of your business goals, contact us here or at email@example.com.