Insights from Recruitment Agency Sales
One of the persistent myths in business sales, applicable across all sectors, is the belief that the ideal buyer for your business is one of your known, local competitors. The logic seems sound: they understand your business and its reputation. What could be better than a nearby firm taking over, paying a premium, and maintaining business continuity? However, reality often contradicts this notion.
The ‘Wishful Thinking’ Trap
In most cases, this scenario is unachievable. There’s a prevailing rule that if a local firm or competitor is interested in buying your company, they would approach you directly. If they haven’t done so, it’s unlikely they are interested or willing to offer a reasonable price. Even if they approach you directly, they will probably have no idea of the value of your business on the open market and offer a lot less than it would get elsewhere.
This general principle often holds true, making it predictable that approaching local competitors who haven’t shown prior interest or engaged with your business broker will not yield favorable results.
The Pitfall of Cheap & Easy Recruitment
When you approach a competitor, they become aware that your staff might soon be available for employment. This not only makes your employees a target, but if your employees find out about the approach it can unsettle your employees, prompting them to seek stability elsewhere and seriously damage your business.
Staff Discoveries
Your staff finding out about a potential sale can be detrimental. Employees dislike uncertainty, and news of a possible sale to an unknown entity can cause them to look for new job opportunities, disrupting your business operations.
The Risk of Market Intelligence Leakage
Approaching competitors may lead them to feign interest, gather your financial data, review your staff list and salaries, scrutinise your client base, and then ultimately decide not to proceed after gaining all the above information! They might even suggest that your business isn’t worth anything, or worse, expect you to pay them to take it over.
Clients like staying local so good to sell to a local firm
When we have these types of conversations with sellers, who tend to be extremely keen on the notion of selling to a local firm, they tend to point to examples of other businesses they know of who have managed to achieve a sale or transfer to a local competitor. How did they manage it, and why do you think it is such a bad idea?
Misleading Success Stories
It’s common to hear about businesses that have sold to local competitors, but these situations usually involve financial or structural difficulties that necessitated a quick sale, often at a less-than-ideal price. Genuine value-adding deals between local firms are rare.
Viewing from Their Perspective
Consider why a local competitor would want to buy your business. They don’t need to purchase your company to acquire your clients or staff—they can target them without paying for the privilege simply by marketing to the same sector. Providing them with detailed information about your firm only facilitates this process.
Summary
Carefully consider the implications of approaching local competitors. Despite repeated advisories, many still believe it’s a viable strategy, only to have their time wasted and sensitive information exploited. Selling to a local competitor rarely achieves the desired outcome. If you have any questions about this article or are considering selling your recruitment agency, contact us at Recruitment Agency Sales for expert advice and support.
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Visit us at www.recruitmentagencysales.com for more information.