First, I’m a proponent of seminars and anything that can help educate business owners, but some seminars are high-pressure sales presentations – even if it doesn’t seem like it.
I’ve led sell-your-business seminars and I may do it again. Seminars are a common marketing channel that many of us in this industry use. I didn’t especially like the travel and setup, but once in the room I enjoyed educating and correcting common misconceptions that people pick up on the Web and elsewhere. It is a marketing tool, so I would follow up with each attendee to see if we can help them sell their business – no surprise there. But it wasn’t a hard sell, and I didn’t rush anyone.
However there are some seminars out there that are designed to sign up sellers quickly. In fact, I just had a client send me an email announcement today about an upcoming seminar – and I happen to know it is one of the bad ones. Like any scam, the best way to attract customers is to tell them what they want to hear. In this case, the company tells the audience that they can unlock the value in their business. Indeed, if the business owner signs up (typically for $20,000 to $50,000), the company provides an overinflated valuation that continues to make the business owner happy – for a while. What the business owner doesn’t get is a buyer for their business.
For example, this is the text from one seminar:
Don’t Fall Victim to Using Formulas
Many business owners mistakenly base their company’s value solely on past performance, rather than on future projections. Our proven M&A process first uncovers each company’s unique, often overlooked features. These distinctive qualities cannot be computed by a formula, yet are vital to negotiating the best deal. With this information, we can then build a growth projection incorporating the full scope of your company’s strengths. The result is an enhanced value for the business, one that could not be predicted by any single formula.
While true in some respects, the company builds on this statement to overvalue and set unrealistic expectations for most business owners. We were called last year by a business owner that went to this seminar. He paid his money and got a wildly inflated valuation. It was based on a growth projection that was clearly unrealistic since his sales numbers had been in decline and nothing had happened to change that. I asked how he came up with the projection and he said the M&A company had done the projections! It is still hard to believe that is completely true, but in any case it was clear the numbers were inaccurate and I can guarantee that not one buyer would believe the projections.
This business owner called us because the M&A firm had, as far as he could tell, done nothing to sell the business. They had not dug up even one prospect. I looked and there were no web listings on any of the business-for-sale web sites. It certainly looked as if nothing was done.
The other problem with seminars, is that the very business model of running a lot of seminars tends to create a company that signs up far more companies than it sells. Why? The folks running the seminars are usually paid on signing people up, not on selling companies. That upfront fee you pay to the seminar oriented M&A firms goes to that layer of marketing to business owners, not on selling companies. An excellent thing to do when you talk to an M&A firm is to ask and understand how people are being paid. For competitive reasons I will not say here the structure we have at the Woodbridge Group and how exactly I’m paid, but I tell each and every one of my clients – but I can say its on selling companies, not on landing new engagements.
Many business-for-sale seminars are good. So feel free to attend, but keep a few things in mind. Don’t sign up for anything right away. Go back and do some research (for example, I happen to know that at least one company has more than few entries at ripoffreport.com), and most importantly, ask for references. A good idea for references is to make sure the M&A firm not only provides past success story clients, but also gives you a reference of someone who is a current client. Because even the worst M&A company can accidently sell a few companies.