Why A Bids-Invited Process Helps to Increase Your Business’ Valuation When It Is Time to Exit Your Business

You have decided it is finally time to take the next step in your exit strategy. You are ready to sell your business or seek a growth partner. Whether you are seeking retirement or looking for a strategic partner to assist you with future growth, you will want to get the best offer from a prospective buyer with the best cultural fit. In Benchmark International’s experience,  utilizing a  bids-invited process can help you to achieve these goals.

What it is

While some firms utilize a listing price when they go to market, Benchmark International allows the market to dictate the value of the business. Thus, we go to market without a listing price. We encourage clients to establish a relationship with the perspective buyer by meeting with the buyer at the client’s place of business to establish a mutual interest. Once initial offers are made, we use competitive tension to prompt increasingly higher bids. Throughout this process of receiving bids and leveraging competitive tension,  we work to identify the buyer you feel confident in who is a great cultural fit and provides a valuation and deal structure that meets your expectations. Again and again, Benchmark International’s proprietary process has been proven to be an effective tool in allowing business owners like you to find the best possible deal for your business.

Why it works

There’s no cap. Our aim is to maximize your business’ purchase price. This would be hampered by using a listing price, as it puts a cap on what most buyers will offer. At the grocery store, would you pay $20 for a sandwich that is clearly labeled as costing only $5?  Of course not, and neither would you be expected to do so. The same concept applies to a listing price. If the business only costs so much, why would a buyer pay more?

On top of this, most buyers will try to negotiate down from a listing price. Think, if you will, of a flea market. Most savvy flea market shoppers are aware they can haggle with the shop owners, and they take full advantage of their right to do so with the ultimate objective of paying less for what they want. Buyers will often do the same thing with businesses, trying to pay less than what is advertised. While this course of action is normal and expected, it can be minimized through our bids-invited process, which does not utilize a listing price for the buyer to negotiate down from.

Competitive tension helps to drive offers up. A buyer’s first offer is very rarely their best, but our bids-invited process can use an initial offer to prompt better offers. When one buyer makes an offer, it can pique the interest of others and inspire them to place their own higher bid. Each buyer will value a business differently depending on the opportunities available to them post-closing; these multiple perspectives of the business’ value will allow low bids to fall by the wayside in favor of bids placed by buyers who wish to make an offer that reflects their genuine interest in the business.

Learn more about why competition matters here.

You have a stronger negotiating position. When you receive multiple competitive offers, you are afforded more room to ask for what you want in terms of price and conditions. The leverage you gain in negotiations when considering multiple bids is crucial to providing you with the best valuation of your business. This level of influence is not possible in a process without the competitive tension provided by a bids-invited process.

Buyers get to know your business. Benchmark International promotes discussion and visitation between buyers and sellers. By getting to know you and your business, especially when physically seeing it, a buyer better understands the business and its culture. A listing price can deter buyers from learning more about the opportunity. The transaction becomes impersonal, and it is easy for a buyer to make untrue assumptions because they have not taken the time or had the opportunity to get to know your business. We want to avoid the sterility that comes with a listing price and instead find that buyer who is an excellent cultural fit and has fallen in love with the idea of buying your business.

How we can help

While there are many different types of M&A firms that run different processes, a bids process has consistently shown that Benchmark International is able to achieve above market offers for our clients. If you are ready to take that next step and bring your business to market, it is worth putting some thought into your objectives for going to market. If you are curious about our process and want to increase the purchase price of your business, our topnotch team at Benchmark International would love to have a conversation about how we can help fulfill your dreams.

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