Beauty is in the eye of the beholder. And when it comes to selling your business, value is in the eye of the buyer.

Lower-to-mid-size businesses typically go to market without a preset asking price. You will set an internal benchmark with your M&A advisors, but we won’t publish or discuss your value expectations with potential buyers.

Different buyers see different value in your business. So publishing an asking price is like setting a ceiling on what your business is worth. Case in point:

We’re representing a business that recently received four indications of interest (IOIs). An IOI is the earliest stage of the acquisition process in which would-be buyers submit their target acquisition price and general conditions for completing a deal. At this point, buyers have read a thorough prospectus on your company, but they haven’t visited your business site or done any significant due diligence.

After we vetted the original round of IOIs, we set up conference calls with the owner and potential buyers. At that stage, one of our buyers dropped out. While the acquisition made sense synergistically, it looked like culture issues could be an obstacle.

The other three buyers moved on and submitted letters of intent (LOIs).  An LOI is a more formal offer, including a firm acquisition price and deal structure. Two of these offers came in near the $10 million mark while the third came in closer to $20 million.

Three different buyers saw the exact same information, so why did one offer come in so much higher? In most cases, it comes down to motivation, synergies, and the buyer’s growth strategy.

Sometimes, a buyer sees significant cost savings by rolling your business into theirs. If they can add your revenue without adding all your costs, your business will be worth more to them than a buyer without those same advantages.

Other times, buyers are motivated to grow. They may have excess capital sitting on the balance sheet and buying a business will provide better returns. Or they may be a mid-size player in a consolidating market who knows they either need to eat or be eaten.

Maybe you have solid market share in the buyer’s next growth target, you have a lock on a coveted blue-chip customer, the buyer can better increase sales or reduce your cost of doing business, etc., etc.

At the end of the day, value is relative. When selling, you want buyers to determine how much value your business has to them. The buyer who will pay the most is the one who can leverage your business to the greatest advantage.

To get the best price, you need a structured sale process that brings all logical, qualified buyers to the table at the same time. That’s how you get the market to truly set your value.