Selling a company


This post is by Seth Godin from Seth's Blog


Cars aren’t like companies. Most cars on the road will be sold, again and again, until they end up as parts. Companies usually start and end with their founders.

Sometimes, a small, stable company is sold to an individual operator, usually for a multiple of the expected annual profit. It’s an investment in future cash flows, but it can be fraught, because, unlike a car, you can’t take a company for a test drive, and they usually need more than a periodic tune-up and charging station visit.

The market for used companies isn’t as efficient or reliable as the one for used cars, as surprising as that might sound. The individual who seeks to buy and operate a used company is rare, and doesn’t often have access to significant capital.

The company sales we hear about tend to be more strategic, where the buyer believes that the purchased company offers synergy (1 + 1 = 3) with their existing businesses. Perhaps the buyer has a salesforce, investment capital, systems or structures that make the combination of the companies far more successful than they would be alone.

One way to look at this is the think of the assets you’ve built. They could include:

  • Patents, software and proprietary systems
  • Machinery, leases, inventory and other measurable assets
  • Brand reputation (including shelf space at retailers)
  • Permission assets (which prospects and customers want to hear from you)
  • Loyal, trained staff

More elusive than some of these are things like: