Will It Hurt My Rural Business if People Know It’s for Sale?

Article by Gary Hubbell, ALC

Broker/Owner, Accredited Land Consultant

United Country Colorado Brokers & Auctioneers

No! That’s the answer. It’s a silly question, isn’t it, “Will it hurt my business if people know it’s for sale?” We’re done here, right? No? We’re not done? You want to know why it won’t hurt your business if people know it’s for sale. Let’s put the shoe on the other foot. Would you quit going to a particular hardware store, restaurant, accountant, auto mechanic, welding shop, or organic peach orchard if you knew it were for sale? “I’ve sold a lot of businesses,” says my colleague Mike Krieg, “and I’ve never thought about not using a particular business, knowing that it was for sale. It has never crossed my mind.” I agree.

The typical secretive process of buying and selling a business

A typical process of selling a business involves contacting a business broker, who markets the business on some not-very-well-known “business buyer” websites. It’s on the down-low and hush-hush, with NDA’s (non-disclosure agreements) and LOI’s (letters of intent) flying back and forth over the internet. Here are some of the arguments for keeping a business sale quiet:

• Employee issues — Staff may become insecure, leading to resignations, reduced productivity, or demands for raises/retention bonuses. This is especially damaging in service-heavy or skilled-labor businesses.
• Customer/supplier reactions — Loyal customers might take their business elsewhere due to uncertainty about future quality or ownership changes. Suppliers/vendors may tighten credit terms or demand faster payments if they sense risk.
• Competitor exploitation — Rivals could use the information to poach customers, employees, or even make lowball offers knowing the seller is motivated.
• Perception of distress — A visible or prolonged public listing can signal problems (e.g., financial trouble), weakening the seller’s negotiating position and potentially lowering offers.

Rural commercial markets are different than the typical urban/suburban market

These ideas of confidentiality may be true in crowded urban and suburban markets. Personally, while I can understand this reasoning, I don’t buy it when it comes to most commercial businesses in a small-town rural environment. The problem with this “keep it discreet” scenario is that you’re marketing ONLY to a small group of very serious buyers who are also looking at many other competing listings, often in towns and cities far away from your listing. They have no particular bond or affinity to your community. With our outfitting business listings, we commonly receive multiple inquiries from non-native English speakers who couldn’t identify an elk if it stood on the hood of their car. They’re seeking one thing, and one thing only–cash flow. If it produces enough, they’ll find a relative to fill the spot and move into your town. They have no personal investment in the business whatsoever. When I get these queries about an outfitting business, I ask the potential buyer: “Have you ever killed an elk? Can you saddle a horse?” The answer is, “What?”, which I interpret as, “Of course not,” and I delete their record. The point is, we are actively vetting buyers to produce someone who is a fit for the local community and the traditions that we embrace. If you list with a business broker, you’re working with a small buyer pool. Many business broker platforms are not very strong, which means you may not get the right price.

There’s a high pride of ownership and community involvement with our business sales

All of our business sellers have a high pride of ownership and community involvement. They may have supported the local Booster Club, Rotary Club, Rocky Mountain Elk Foundation, 4H Club, FFA, or Chamber of Commerce for many decades. They’re proud of that history and community involvement. Out-of-town buyers looking only for cash flow often know little about your community and have no real relationship with the area, and better yet, they don’t care. Ask yourself, would you pay top dollar for a business when you’re not really sure what the community is like and if you’ll fit in there? Probably not, right? So you’re likely to lowball your offer. When it comes to small rural communities, the best buyers are the ones who plan to stay for the long term and sink roots into the community. Not only will you, the seller, get the best price, but there’s a much better chance that your asset will stay vibrant for the long term and provide the same great service that you offered.

How is the business broker’s marketing? Is it as strong as ours? We doubt it

First, let me explain that our marketing ROCKS. Our marketing platforms are thorough, extensive, and penetrating. We like to tell people that ANYONE wanting a property like theirs will know about it. We had a winery listed for a period of time and brought the sellers two very good offers–highly qualified buyers, cash offers, close quickly. BOOM! Right? Wrong. The sellers didn’t like the number, which we had already told them it was worth, and they rejected both offers. They chose to let our listing lapse and listed the winery with a business broker. Interestingly enough, we received several inquiries about the winery from our old expired listing. We had to dig deep to find out who in the heck had the current and active listing, which was not evident on the internet without deep research–certainly not on the first or second page of Google searches. As it stands today, the sellers are old and tired, cratering the business, selling off the wine tanks and inventory to…heck, we don’t know, but certainly not the seven-figure number that we had brought them. If they’re lucky, they’ll get 25% of that amount. In the meanwhile, we’re receiving panicked emails from the business broker, asking if our buyers are still interested before it all goes to hell.

The stigma of making it known that businesses are for sale

Somehow the conventional wisdom has become a stigma—don’t let the word out that your business is for sale. People get very concerned with the idea of letting the community around them know. Why? Yes, it’s true, people love to talk, and you might be the talk of the town. But that lady’s cousin is retiring from the military after 20 years and wants to come back home and is looking for a new venture. Or that guy’s best friend has always wanted to be an outfitter, he comes hunting here every year, and your business is for sale. Or her sister-in-law from Denver just inherited some money and wants to invest in a local business. She’s visited here many times and has always wanted to live here. Those buyers are like to pay top dollar, aren’t they? Quite often, your local community will be your biggest asset in helping you sell your business. If they never learn it’s for sale, they will be no help at all.

Should I allow the broker to put a sign on my rural business for sale?

“We don’t want any signage on it,” sellers say. “It could hurt our business.” Why? Many businesses have high-visibility locations with thousands of cars going past every day. My office location on Highway 92 west of Hotchkiss gets over 7,000 cars a day. If I had it for sale, why wouldn’t I spend a couple hundred bucks on some signage to let all those folks know that a new opportunity exists? How many of them might be interested buyers? If only one in a thousand were interested, that would still be seven buyers, which is a nice pool to work from. You could work pretty hard with newspaper ads, social media posts, postcards, websites, you name it, to reach 7,000 people in a day and spend a lot more money to do it. Now let’s do a little test. How many people, out of the thousands driving past, might be interested in your business? A handful? A dozen? That’s likely, right? Out of the same number, only a certain percentage will be clients of yours. How many buyers or clients will you lose because of that same signage? As my friend Mike Krieg says, “It has never entered my mind to not patronize a business that I know is for sale.” If you think about it, a business that is for sale is going to try harder than one that’s not on the market. The service should be snappier, the food should be better, and the place should be cleaner than most if they really want to sell. Right?

What about confidentiality?

In truth, issues of confidentiality remain the same. No one with knowledge of your books and operations should be publicly discussing it with anyone else without your permission. We require any buyers to sign a non-disclosure agreement with their solemn affirmation that they won’t share confidential details of your business. If they do, they could get sued. We also vet any buyers and pre-qualify them for their ability to purchase prior to showing our businesses for sale so that we don’t have unqualified people learning about our confidential assets for sale. I received a spam buyer inquiry from some scammer while I was writing this article, as I do several times a week. I defined the threat and deleted the “buyer”.

You have two choices—be discreet, or be open about your business sale. It’s all the same to us.

We can list a business either way—discreetly, without naming the business or disclosing the address, or openly. If you choose to list discreetly, we write the listing copy in such a way that the buyer has a general idea of where the business is and what is offered, but the true identity is not discernible from general marketing. Once the buyer has been vetted and has signed an NDA, then we can go deeper into disclosure. With an open and transparent listing, we still keep private details of your business confidential until a signed NDA is in hand. The difference is that we openly market the asset and you, the seller, have a much larger buyer pool to work with. We will work with sellers in either capacity and without judgment. We just feel, however, that in many cases it’s a better idea to let the world know that you’re offering your business for sale. We market broader and more intensively than pretty much any business brokerage, and we’re confident that we can bring a buyer and get you moved on!

Gary Hubbell, ALC, is an Accredited Land Consultant and the founder of United Country Colorado Brokers & Auctioneers. He has an astounding record of selling 33 Colorado outfitting businesses as well as 7 Colorado wineries. Together with his son, Jake, they have sold bed-and-breakfast inns, orchards, RV parks, commercial ranches, farms, hotels, motels, and commercial properties across Colorado and Utah. Gary has presented at the National Land Conference on selling rural properties with a commercial component.