Selling Your Business To A Competitor
If you have arrived at the conclusion that selling your business is in your best interests and ultimately what you want to do then you should begin advertising that fact. You should use a non-disclosure agreement and consult an attorney to protect your business interests. You may then receive bids from a number of interested parties, and they may be from budding entrepreneurs, friends, employees, large chains or even your competitors. Selling your business could be difficult for you no matter who you sell it to but it may be even more of a bitter pill to swallow if you sold it to your competitor. However, this is one case of resentment that you should put to one side because selling your business to a competitor can often be in your best interests.
Why Sell To A Competitor?
Personal feelings aside, selling your business to a competitor can result in the best possible financial deal for you. Although competitors have traditionally waited until the best possible time to purchase business competitors in the local area, the local economy is important to them and enhancing their market share will often result in a great deal for you.
During the process of due diligence, a key issue in determining the value of the business is the potential growth. If an external company or individual were to place a bid then the price would likely be less because of your local competitor and its market share. As such, it is feasible that the potential growth would not be as great. However, if your competitor were taking over then it would simply be expanding his or her market share and so would enhance the potential for growth and profitability.
However, it may be an international competitor that wants to purchase your business instead of a local one. This would be to extend the scope of the business and give the company a greater foothold in the marketplace. You would have peace of mind knowing that your business would be in good hands as part of a bigger business plan.
What Is In It For Your Competitor?
If a competitor wants to buy your business then, believe it or not, he or she has a lot more to gain than you may think, which is why your asking price could be pushed a little higher as stated above. Not only would your competitor be able to enhance his or her market share, but it would also open up a whole new element of growth. The contacts and contracts that are held by your business would be extremely valuable and could actually take his or her business to the next level. It could be that you have a new technology that your competitor does not have. Either way, the contacts, technology and contracts are all important in establishing a higher price, especially if all of the above was of immense value to your competitor to begin with.
Selling your business to your competitor is also in the best interests of your competitor because then it does not have to worry about someone buying the business that would have the potential to take away their market share. By having both businesses, the competitor is protecting its best interests. Also, a competitor would be minimizing similar business expenses and so would garner even greater profits. The potential is there to achieve double the profits without doubling the expenses. Of course, that is not guaranteed to happen but it is possible.
All of the above add up to the fact that your competitor would probably be more open to negotiation than an external party. Furthermore, you already have a level of knowledge about how they actually work and so would be able to use this to leverage the best possible deal. Although your emotions may get in the way, putting them to one side would ultimately be in your best interests in the long term.
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