There it was on the broker’s site, the business broker, that is. The context was the sale of various healthcare facilities, deals which, by definition, involve the sale of less than 100% of the business. Picture, for example, the typical acquisition of a surgery center, with the selling physicians remaining on as co-owners.
The offending “advice”? — That the broker would work to get you, the seller, as much money as possible because the sale was, after all, a once in a lifetime event. And that is the problem.
Across all industries, the huge majority of companies, perhaps as high as 70% or more, desiring to find a buyer never actually sell. Why? Because the seller or sellers stake the deal on making a killing, hoping to pull out all that cash that they failed, or were unable, to pull out all along the way.
The key to success in business is to create a succession of events in which you’re pulling out cash, whether that’s a series of healthy paychecks along the way or a series of building and selling companies. It’s not slapping a high price on a solitary deal hoping that a greater fool on steroids will come along and pay it to you. Real buyers don’t usually fall off of turnip trucks.
Don’t fool yourself that a single ASC tied to a two-person medical practice in middle of nowhere USA sells for the same multiple as a 45-facility deal purchased by publicly traded company. If you pulled out money along the way, you wouldn’t have to worry about it.
There’s another way of looking at it, too. The broker is lying to you about valuation. He’ll let you know when he tells you a few months down the line that you have to be reasonable because, after all, “you do want to find a buyer, don’t you?”