Key takeaways
- The first meeting is for the buyer to decide whether to make an offer, not for the two of you to negotiate one.
- Everything you say becomes a diligence item, so say only what the package already proves or what you can prove.
- Talking too much, revealing urgency and criticising your own business are the three most expensive habits.
- Prepare for the questions you will be asked, know your numbers, and let your adviser manage the agenda.
By the time a buyer sits down with a seller, they have signed a non-disclosure agreement, read the confidential information memorandum and decided the business is worth a meeting. The meeting exists so they can test what they have read against the person who built it. Sellers tend to treat it as a social occasion or as a negotiation. It is neither, and both mistakes cost money.
This guide lists the errors we have watched owners make in these meetings across British Columbia, and the approach we coach instead. We attend first meetings with our sell-side clients, and much of our job in the room is preventing what follows.
Talking too much
Owners love their businesses and have rarely had an interested audience. Given one, they talk, and in the talking they volunteer things that were not asked: the customer who is thinking of leaving, the equipment that is on its last legs, the employee who is difficult, the year that was better than this one. Every one of those becomes a diligence question and, later, a price adjustment.
The discipline is to answer the question that was asked, fully and honestly, and then stop. Silence is the buyer's to fill. If you are not sure how to answer, say that you will check and come back, which is what a careful owner does.
Revealing urgency
A buyer who learns that you must sell by a certain date, that your health is forcing the decision, that you are exhausted, or that a partner is pressing for an exit, has learned that time is on their side. They will slow down, and the price will follow. Your reasons for selling are legitimate and they are also private. Give the reason in the form the package gives it, and do not elaborate.
The same applies to the other direction. A seller who says they are in no hurry and might not sell at all tells the buyer not to bother. The right posture is that you are selling, that you have a process, and that the process has a timeline you control.
Negotiating too early
The first meeting is not the place to discuss price, structure, transition or vendor financing. A buyer who raises them is testing you, and an owner who engages has given away their position before the buyer has committed to anything. Every question about terms should be met with the same answer: the process is that interested buyers submit a letter of intent after the meeting, and terms are discussed then.
This is one of the reasons to have an adviser in the room. It is easy for us to say that terms come later, and hard for an owner facing a direct question across their own boardroom table.
- Volunteering problems that were not asked about
- Explaining why you need to sell, or by when
- Discussing price, structure or financing
- Criticising your own staff, customers or suppliers
- Making claims the package does not support
- Agreeing to anything, including follow-up access, without your adviser
Being unprepared for the obvious questions
Buyers ask predictable things. Why are you selling. What do you do each week. What happens when you are away. Who are your largest customers and how long have they been with you. What would you do with another year. What keeps you up at night. What has changed in the last year. Where do the leads come from. Owners who have not rehearsed these answers either ramble or contradict the package, and both damage credibility.
Know your numbers. If the package says your largest customer is a certain share of revenue, know it, and know the customer's history. If the normalised earnings are a particular figure, know what the add-backs are. A seller who has to look at the adviser for every number has told the buyer that the numbers are the adviser's, not theirs.
How to run the meeting instead
Let your adviser set the agenda and open. Give a short, prepared account of the business, its history and what you are proud of, in a few minutes. Then take questions. Answer each one directly, from the package where possible, and stop. Show the premises if that is part of the plan, and show them as they are on a normal day. Close by confirming the next step, which is a letter of intent if the buyer is interested, and leave the terms for then.
After the meeting, debrief with your adviser on what the buyer asked, what they seemed to care about and what you wish you had said differently, because the next meeting will go better. If you are preparing for buyer meetings, call or text (604) 632-4959 and we will rehearse them with you.