Most companies deciding to sell have characteristics that drive down their value, such as customer concentration or management all from the owner's family. This article discusses how to minimize discounting by locating the right buyers.

Selling Process

The author discusses the sale of a Human Resources Consulting company. They contacted several industry players, but buyers dropped out because the seller's entire management team was comprised of family members. They took the company off the market and brought in one non-family executive who had the authority to run the company. 
The business is counter-cyclical and grew during the economic downturn. It was difficult to determine how much improvement was due to the new manager.
The business was put back on the market. One buyer was particularly interested and asked to put together his letter of intent.
He started by giving all the reasons to discount the price, e.g., fear of losing key employees, no recurring revenue, etc..  He was provided a chart showing recurring revenue from the top 20 clients to demonstrate consistency and predictability of revenues.
He then focused on the prior year's upward spike and said, "I am just going to use 2015's revenues as my basis for my offer." The author asked how he would have made an offer if last year was unusually bad, but the prior five years were strong. He did not answer, but it is expected he would have made his offer based on the new trend.

Stand Strong

These kind of buyers are common. A famous residential real estate investor wrote a book on investing; his philosophy was to find 100 people with their homes for sale, approach them aggressively, make a lowball offer, and one will take it.
The buyer inquired from a business for sale website - a perfect platform for this philosophy.
Get multiple buyers involved in the process. If you just post on one of the Business-for-Sale websites, you may get multiple buyers interested, but they are the buyers contacting 100 sellers very efficiently in order to make lowball offers.
Six other industry buyers were contacted.  All were looking for acquisitions based on acquiring new customers, adding a product offering, or leveraging their sales force or install base. Their motivation was not to buy a company with a lowball offer.

Encourage Fair Offers

The way to encourage buyers to make fair offers is to conduct outbound marketing to industry buyers that have strategic reasons for making acquisitions.  If a business seller only attracts inbound, bargain seeker buyers from websites, they will be getting low ball offers and waste time.