When it Comes To Selling Your Business, Your Industry Doesn’t Matter As Much As Your Think
The first question a client asks me is often, “But have you helped someone in MY industry?”
“Well how many medical practices have you sold?”
“But have you worked with a HVAC company before?”
“Well, you know, selling automotive valves is different than selling other things!”
I get it. Your business is special. Unique. One-of-a-kind.
And when it comes to selling or scaling it, you’re looking for something in your adviser’s background that will make you feel safe.
If you own a car dealership, it’s comforting to know I’ve sold those before. If you run a consulting firm, it’s nice to hear that we serve as fractional CFOs for lots of those. If your business is manufacturing, it might be reassuring to hear me throw around some metal fabrication plant lingo.
Meeting with a Photography Studio owner.
But that actually doesn’t matter at all.
In fact, one of the reasons you should work with Doescher Group is precisely because we work with so many different companies across different industries.
You’re the expert in your field. We’re the expert at packaging businesses for sale, investment, and financial management. That’s what we do.
We might not be able to speak the lingo of your industry or know the names of the manufacturing machines in your plant, but we speak the lingo of that in-between world between business owners and investors.
When it comes to hiring a professional adviser, such as Doescher Group, as your Fractional CFO (“FCFO”), to conduct a Field Ready™ Assessment, or as your Chief Transaction Officer®, you are specifically hiring us for knowledge that you do not have inside of your organization. The same goes for hiring legal counsel, a tax adviser, wealth manager, investment banker, or any other professional adviser.
So yes, there is a need to understand your business. At Doescher Group, we have expertise in numerous industries some we’ve written about:
Accidental Entrepreneurs: The Hidden Challenge of Healthcare Ownership
Project-Based Financial Modeling: Why Automotive Tooling Needs Its Own Modeling Playbook
But ultimately, you’re not hiring us for our industry expertise. You are the expert in your industry. You’re hiring us for our financial expertise. To get a job done for you.
In the case of the Fractional Chief Financial Officer role, you probably want to understand your financial performance better. So there are certainly aspects of your industry that will change the way we collect and process data to create insights. Are you a project based business? How long do your projects run? Are you a manufacturing business? How do you manage your inventory? Are you in a business where customers prepay for services? How do you manage these customer deposits?
Likewise, to determine if your business is FieldReady™, we will want to understand things like your customer concentration or your owner dependence. The way we look at this might change depending on the industry, but the principles remain the same across industries.
Finally, when it comes to Chief Transaction Officer® engagements, you might be looking to develop or expand your banking relationship, find an angel investor, or outright sell your company to your employees or a third party. In all of these cases, once again there are aspects of your business that will drive value. But the overall process of establishing a line-of-credit, for example, with a commercial bank is unchanged and in these situations, the expertise of how the world of finance works is what actually makes the difference for your wallet.
I get it. You don’t want a dummy than cannot understand what it is you do. But at the same time, you don’t need an industry expert either.
[The exception would be highly specific consulting, such as operations consulting, where you’re providing thoughts on how best to run a specific piece of equipment as an example.]
The Uncomfortable Truth About an Industry Specific Brokers’ Incentives
The Unsolicited Offer Playbook is a free resource available to you here.
I have made this point many times before, but I will make it here.
Let’s say you get a phone call out of the blue from a brokerage firm wondering if you'd like to sell your company. (This is referred to as an Unsolicited Offer in our world.) They do deals like this all the time–they've sold hundreds of companies just like yours. In fact, they know just the buyers who are already interested.
Sounds perfect, right?
Hold on.
If you’re selecting a transaction adviser to help you sell your company, a business broker or investment banker, I will argue that you want them to be familiar with your industry, BUT not too familiar. This is one area where too much industry knowledge can work against you.
Think about the built-in incentives in this scenario.
Your transaction adviser has completed hundreds of deals in your industry. They tell you they know the buyers very well as a benefit of hiring them. But from your perspective, perhaps they know the buyers a little too well. You’re a one-time seller. You’re a client they will see this year, hopefully sell in 9-12 months, and then never see again.
It’s true that you’re paying the broker success fee, but are you sure they’re working for you? A transaction adviser is paid to close deals. If they’re niched in a particular field, they may be too comfortable with the terms offered by buyers. They are less likely to ask for things outside of what they often call “market” terms. Whether you sell for $20 million or $21 million doesn’t move the needle for their fee by much, but $1 million is $1 million for you.
The Downside to Industry-Specific Brokers
Without betraying confidences, I have multiple experiences with industry specific brokers. I have found that they are extremely conventional thinkers when it comes to deal structure and they often oppose their client’s requests when they perceive that might in any way jeopardize their fee. Put simply, they do not want to rock the boat, as they “babysit” their success fee.
In one instance, when I worked for an investor, an industry specific broker would give us the first look at everyone of their new clients. They’d say, “If you’re willing to pay $X million, it’s yours. We will convince our client to skip running a full sales process.” As a buyer we got great deals and avoided bidding wars, but I am certain that those one-time sellers left millions and millions of dollars on the table.
I’ve witnessed this play out many times over the course of my career.
This is the kind of small injustice that led me to found Doescher Group in the first place, where we level the playing field for small business owners.
Summary
In the end, what matters is that the experts you hire know their business–and care about you and your business. This is immeasurably more important than their experience within your industry.
If you’re seeking advice because you don’t have the capability in-house. You may not even know how to determine one’s capabilities.
So how do you pick the right adviser when it’s time to sell or scale your business?
This is where evidence of a job well done is critical.
Take referrals from your trusted advisers.
Check out the adviser’s online content. Are they a thought leader?
Call their references.
Ask for case studies of success stories.
Watch testimonials. They should have testimonials from former clients.
Meet them. Look them in the eye and see if you feel you can trust them.
When it’s all said and done, don’t discount an adviser because they are not claiming to be THE expert in your industry. You’re not hiring them for that. That’s who you are.
