May 15, 2012

Selling the White House - or Your Business

Ken Marlin, managing partner at an US-based boutique advisory firm has some tips in on how to go about putting a price on the White House or your business. 1. Showcase What's Cool.
"You've got to know what's really cool about the property, or about the business," Marlin said. "And, that's what you have to make sure you highlight and communicate to potential buyers."
2. Create a list of the interested buyers might find that potential buyers might want to acquire you for purely financial reasons. Others might want to acquire you strategically as part of a plan to continue building their businesses.
3. Get an auction going
Valuations are always tough when there is no functioning market, and thus no comparable sales to point to. So a smart entrepreneur, whether he's trying to sell a company or a piece of iconic real estate, tries to create one.Often, that means staging an auction. You don't need hundreds of potential buyers: just two, although having more is better."When we advise sellers, we tell them you want an auction. When we advise buyers, we say you want to avoid an auction," Marlin said.
4. Create bidding comfort for buyers. (No one wants to look like a overpaying fool.)
So your job as a seller is to give them a good-faith basis for your asking price or listing strategy. And, you need to negotiate in such a way that the potential buyer understands you could legitimately walk away.
5. Remember: You're trying to sell the future.
"That's what they're buying—the future. And a buyer always has a fear that you know something they don't–that you're selling at the top of the market," Marlin said. "They don't care about the past. From a business perspective, from a corporate perspective, you have to help a prospective buyer see the future the way you see it." The bottom line, Marlin told me, is that putting a price tag on just about any asset is, well, about much more than just the bottom line. So you'll do yourself a service by thinking long and hard about the people involved in the transaction. "Valuation and negotiation are as much about the human element as they are about math," Marlin said. "Probably more about the human dimensions. You can't just apply the math and say, 'My competitor sold for 12 times EBITDA, so multiply my EBITDA by 12.' It just doesn't work that way."
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. Click Here to learn about Venture Intelligence products that help entrepreneurs reach out effectively to the investing community.