Over the years, we have assisted numerous business owners in selling their companies. As in any business, we have encountered all different types of clients and come away from completed and failed transactions having learned some valuable lessons about their personalities and how they conducted themselves during the sale process. While it is virtually impossible to land an “ideal client” and one never knows what the interactions will truly be like until the deal gets underway, we have developed a list of 10 attributes that epitomize our “wish list” for a great client. In Part 1 of this two-part series, we will discuss five of the 10 characteristics on our “wish list.” Here they are, in no particular order:
- They are fully committed to the transaction. The owner who is truly serious about completing the sale of their company is “all-in” from day one. In other words, the owner cannot be half-in and half-out, or take the attitude of “let’s see how it goes.” Being partially vested in the process is like a football player playing at half speed – it is a disaster waiting to happen. Owners that are not fully committed to a transaction present clear signals to buyers about their intentions including not being able to answer a series of questions that shows they are committed to selling their company (e.g., they have a strong reason for selling, they have realistic value expectations, they have undertaken the necessary financial and tax planning to determine their cash flow requirements for meeting their objectives, they can live on the net proceeds from the sale, etc.) and generally not being responsive to the process. Certainly transactions are consummated when sellers are not fully committed to the process; however, lack of full commitment decreases the odds of achieving a successful outcome.
- They establish a strong business relationship with their advisor. For better or worse, the owner-advisor relationship is an intimate professional engagement that can last a long time — often nine months or longer – and this assumes that there is no relationship prior to the commencement of the sale process. Owners who embrace their business advisor as a trusted guide and confidante tend to fare far better in the sale process than those who are unwilling to bring their advisor into their circle of trust. It also makes the advisor’s role easier and much more constructive when the owner is willing to have an open, honest relationship.
- They are a team player. It is critical that the owner views their business advisor as an ally, and understands that both are on the same side seeking to accomplish the same goal — the sale of a business at the best price and terms to achieve the owner’s objectives. It is challenging enough to orchestrate a sale while battling the buy side without having to battle internally with the sell side as well. The transaction goes much more smoothly when all of the players recognize that they are on the same side working toward the same outcome.
- They are coachable. In conjunction with being a team player, great clients are also coachable, meaning they acknowledge why they hired their business advisor in the first place, while also recognizing the limitations of their own abilities. Among other things, that means being receptive to guidance from their business advisor rather than out of hand rejecting every idea or suggestion. For example, if the advisor recommends having GAAP financial statements prepared or upgrading counsel, the owner should be open minded to those suggestions rather than immediately dismissing the ideas and insisting on doing it their own way. Typically, the business advisor is drawing from a much larger well of knowledge and experience than the owner, so it is in the owner’s best interests to listen with an open mind and seriously consider the professional and expert guidance for which they are paying.
- They answer the question the advisor should have asked, not the question the advisor asked. In theory and practice, no one knows their business better than the owner. Therefore, when a business advisor asks a question that as an outsider they think is the right one, the owner should not hesitate to redirect the question and to provide an insightful answer that actually applies to their company and gets to the heart of what the advisor really wants and needs to know about the business. The owner should not respond to the question as if they are on the witness stand and literally answer the question that was asked. This is counterproductive and not in the spirit of the immense task at hand.
Of course, the definition of a “great client” is largely subjective. The owner who is one business advisor’s cup of tea may not be another’s. In our experience, however, these are five of the 10 attributes that we look for in an ideal client. It is challenging enough to complete a transaction under the best of circumstances; however, when all parties cooperate and are on the same page, the odds of successfully completing a deal that meets everyone’s expectations are greatly increased. We will discuss the remaining five characteristics of a “great client” next time in Part 2.
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