Finding a potential buyer feels like finding a good dance partner. You want someone who can match your rhythm until the music ends. Likewise, the buyer wants someone who won’t step on their toes. With acquisitions, how you interact with the buyer before hitting the dance floor (or negotiation table) will influence their opinion of you, which can help or harm your deal.
No buyer wants to work with someone who seems insincere, unprepared, or uncommunicative. They want you to know your goals and understand how acquisitions work so they don’t have to walk you through the process, slowing down the deal.
Knowledgeable sellers inspire more confidence in buyers, so be transparent about your process and follow these seller etiquette lessons to improve your chance of closing with the ideal buyer.
What Is Seller Etiquette?
Seller etiquette is a set of behaviors that helps you connect with buyers and establish a trusting relationship with them. The better your relationship, the more likely the buyer will agree to your terms, helping you achieve your acquisition goals.
Buyers requesting access to your startup are already interested. It’s your job to nurture that interest until they make you an offer.
Why Do You Need to Know About Seller Etiquette?
Buyers often weigh more than one startup at the same time. To make yours stand out, connect with them on a personal level. Metrics and numbers will only get you so far – the right attitude encourages the buyer to see the deal through closing and beyond.
Even if your deal collapses, ending on good terms keeps your reputation intact when you reenter the marketplace. Buyers have long memories and might spread the word to others if you make a poor impression, shrinking your buyer pool. No one wants to work with someone who’s discourteous or disrespectful.
To help, we’ve curated some tips and tricks to help you navigate the acquisition dancehall (er, marketplace) successfully.
1. Value Your Business Realistically
Practicing good seller etiquette begins before you engage with buyers. As soon as they look at your listing, they’ll get a feel for how you’ll conduct the sale based on your valuation.
What does your valuation tell them? An outrageous price tells buyers you’re not serious about the deal because the price doesn’t align with the market. Unless you can justify your valuation with concrete metrics or facts, the buyer won’t have much faith in it. A motivated seller would refer to our biannual Acquire Multiples Report and use the appropriate valuation methodology. For a second opinion, you can always consult an M&A professional too.
How Do You Value Your Business?
Start by selecting the appropriate valuation method and compare the results to our Multiples Report to see if your valuation fits market trends.
Your asking price is more than just your valuation. What is most important to you? Price? Timing? Deal structure? The transition of your team? Ideally, you’d earn all those things, but the market doesn’t always allow for it.
That’s when you have to pick and choose your battles. Is it worth shrinking your buyer pool to value your business higher? Or would you rather use a lower multiple to attract buyers willing to negotiate better terms? Determine your priorities to calculate the appropriate asking price for your business.
And remember that once buyers see your asking price, they’ll form an impression of you. They’ll ask themselves if this person knows the marketplace well enough to value their business realistically and close a deal. Start your acquisition process on the right foot by demonstrating your seriousness and knowledge.
2. Connect With Buyers Via an Opening Message
When a buyer signs an NDA and requests access to your startup, they expect to open a dialogue with you. Show initiative by sending them a message within 24 hours of their request.
The deal won’t advance if no one starts the conversation, so quickly introduce yourself and ask the buyer about their background and interest in your listing. By breaking the ice, you invite the buyer to communicate regularly and start the process on friendly, first-name terms. Their response to your opening message also allows you to gauge their seriousness and interest in your business.
A typical opening message might say, “Hey, thanks for reaching out. What got you interested in my listing specifically? And how do you plan on funding this transaction?”
Don’t worry about being too invasive with these questions. They’re critical, need-to-know queries to help you advance this deal or kill it early.
3. Respond to Buyer Messages Quickly
Sending an opening message is pointless if you don’t follow up with the buyer afterward. Keep those communication floodgates open by responding quickly to all buyer messages. Ideally, you’ll reply within 24 hours to keep the buyer engaged and interested in your business.
Quick communication doesn’t display weakness. It shows the buyer you’re willing to get things done and keep the process moving. Ignoring the buyer tells them you’re only semi-committed to selling your business and might push them to pursue other listings.
Both of you want to close quickly, so respect each other’s time by communicating consistently. Sellers who respond to over 90 percent of messages are more than twice as likely to close as sellers who respond only half the time. Get your business Acquire’d by proactively messaging and responding to buyers.
4. Communicate Your Deal Timeline Early On
After the buyer responds to your opening message, send them your deal timeline with a phone or video meeting invite.
Moving into buyer-seller calls as soon as possible helps you gauge a buyer’s personality and fit for your business. Chats lack nuance and tone that you pick up better in buyer-seller meetings.
The timeline tells them when they should expect buyer-seller calls, when you’re taking offers, and the deadline for offers (or rejections).
Being transparent about your plan holds everyone accountable. The buyer knows exactly what to do and when to advance the deal. You’ve told them how you plan to keep things moving and demonstrated your ability to manage multiple responsibilities. If everyone sticks to the timeline, the deal will gain momentum and hurtle toward closing.
5. Keep Multiple Buyers Informed
Let’s say you’ve earned multiple offers. You get your pick of the best ones, but you can’t let the situation go to your head. Deals can end badly if you don’t follow good seller etiquette while dealing with several buyers.
The main thing you DON’T want to do is accept an offer without talking to the other buyers. One, it could leave money on the table because you haven’t fully negotiated every offer. Two, buyers might feel disrespected by your lack of communication.
To be fair to everyone, communicate how the multi-buyer process will work upfront. As each offer comes in, say something like, “Hey, thank you for your offer. We have a deadline of this date. We’re still expecting a few more offers to trickle in. From there, we’ll ensure every buyer has a fair shot at the deal. Before I make a final decision, I’ll come back to you and let you know what we’re doing.”
Send this message as soon as possible instead of waiting days or weeks to outline the plan. If you don’t communicate with buyers when they send their offer, they might rescind it because they don’t think you’re serious about the deal.
Once you’ve gathered your shortlist, explain your criteria for an ideal buyer and allow the buyers to adjust their offer. That way, everyone gets a fair shot to present the best possible terms and convince you to close with them.
After talking to each buyer one-on-one and selecting the best fit, communicate your decision to everyone involved so you can part on good terms.
By maintaining your relationships with these buyers, the doors stay open for future collaboration. Maybe you want them in on your next venture. Or maybe your deal fails with the current buyer and you can resume negotiations with those still interested.
What You Should Expect from Buyers
Acquisitions are two-way streets, and it’s just as important that buyers treat you well and respect the acquisition process. What behaviors should you expect while dealmaking?
For a complete list, check out our guide to buyer etiquette. But in a nutshell, buyers should:
- Respond quickly to your messages. Serious buyers want to seal the deal quickly. They won’t waste time waiting to respond or ignoring your messages. Weed out unserious buyers who can’t communicate effectively.
- Ask you relevant questions about your business. A listing can’t cover everything, so buyers should ask you questions to learn more about your business. Being inquisitive shows that they’ve done their homework and want to see how your business fits into their future.
- Align expectations before entering negotiations. Once you enter negotiations, you and the buyer should be clear on non-negotiable terms. If they need seller financing, a specific asset, or a certain transition plan, they should tell you as early as possible.
To begin your acquisition journey today, sign up on our seller site.
How Do You Approach a Buyer?
Before you start looking for buyers, consider your ideal buyer profile. Are they located in the same country as your startup? Are they a strategic buyer looking to expand their current business or a financial buyer looking to scale and sell? Do they have expertise in your industry or enough cash to help your team scale the business?
Answering these questions will help you market your business. Highlight the key metrics and business components that appeal to your ideal buyer profile.
Then put out feelers among your industry connections to see if anyone will bite. Connect with past customers, current employees, or competitors you could see managing your business. You could also hire a broker to match your business with a potential buyer.
But you can also save time and money by listing your business on acquisition marketplaces like Acquire.com. We’ll help you market your business to over 200,000 vetted entrepreneurs, who will message you directly if your listing intrigues them. Check out our blog to discover how to craft the perfect listing, vet buyers, and navigate the acquisition process.
How Do You Encourage a Buyer to Buy?
After crafting the perfect listing to hook buyers, reel them in by answering their questions. Help them overcome their uncertainties about the asking price, closing terms, transition period, and more. The more transparent you are, the more you and the buyer can determine if they’re a good fit for your startup.
The buyer wants to de-risk the acquisition, so highlight components of your business that meet their acquisition goals. If they’re a strategic buyer, how do your business and its assets complement theirs? For a financial buyer, how will your business generate a high return? Understand their motivations to help them see how buying your business will benefit them.
How Do You Ensure Your Acquisition Is Successful?
No acquisition is risk-free. But you can prepare for success by adapting to sudden changes or making a backup plan in case things go sour during the acquisition process.
The buyer might lose their ability to fund the transaction, for example. You could enter negotiations with different expectations than the buyer. An external crisis could arise that forces one or both of you to quit (just ask Nicolas Huxley, founder of Elephbo).
Quitting should be a last resort, especially if you’re far along in your deal. At that point, adapting to any changes will benefit both of you because you’ve invested time, and possibly cash, into the deal. You want to see it through, even if it means sacrificing a few terms to benefit the buyer.
If the worst happens and the deal collapses, having a backup plan will save you tons of stress. Be prepared to list your startup again and entice buyers. Contact those who sent initial offers during your first round of vetting. And always bring in legal experts as soon as you sign the letter of intent (LOI). The more you get ironed out in legal documentation, the more protected you’ll be.
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.
