Selling a house on a quarter acre is a piece of cake compared to selling a winery business.
You simply take a few pictures and put the property on the MLS. In a good market, you’ll have multiple offers within a few days, and any hiccups you encounter are easily remedied.
We wish that selling a business were that easy, but if it was we’d be in another line of work.
When a winery doesn’t sell, it doesn’t necessarily have anything to do with the property, quality of the wine, or even your reputation in the industry.
The fundamental problem lies in what we call the “Opacity,” or lack of transparency in the selling process. That is, there’s more fuzziness than clarity in selling an actual business than a piece of property. There are usually as many opinions about a deal as there are people involved, including you, your attorney, your CPA, and the buyer’s team.
Selling Before it’s Time: California Wineries for Sale
When we first meet, we may encourage you to wait, if possible. Many clients are surprised that we’re not pushing for a signature.
“When to sell” is never a simple puzzle to solve. A lot depends on your needs, your personal timing, your family, and the opinions and feelings of your employees. The timing may not be right because of personal concerns, or because you want to build more value into your business before you sell.
Forcing a Sale Price
A potential buyer will usually assess the value of a business differently than the seller. It’s not easy to determine the value of a winery, and it’s natural to want a bigger number. In general, the broker who gives you the highest number will get you as a client, but that’s why three out of four business sales of this size fall through.
Someone will buy your winery for one of three reasons:
- They have a problem that buying your business will solve, such as reaching a new market or filling out their offerings;
- They see the purchase of your winery as opening a new door or giving them an easy foot into a new line of business (people cashing out from another business, for example);
- Or, they simply want to acquire a winery… for fun, profit, or the challenge.
And, they will buy a winery for:
- Its people (human resources)…
- Its equipment or vineyards…
- Or the potential profit.
What you consider to be of high value may be an intangible, or worse – an expense – to the buyer. And, what he considers to be of value may be something that doesn’t show up on your balance sheet.
The true value of your business in the eyes of the buyers isn’t always clear, and you can’t simply do comparison shopping on MLS as you can with a house.
Hiding Things in the Closet
We know from experience that the selling process, from valuation to due diligence, is fraught with ambiguity, uncertainty, and differences of opinion. So, we want everything to be out in the open from the start.
Any single difference of opinion or inconsistency can cause a buyer to back out, so you want to eliminate (or illuminate) potential problems up front. Besides, what you might consider a problem could be a bonus for your buyer. Problems do not kill deals or lower the price a Seller will pay; surprises do, and with the amount of due diligence done on even small deals today, everything comes out eventually.
This means being transparent. Probe. Assess. And, systematically ensure that every detail is made plain as day every step of the way. The buyer will uncover problems and inconsistencies, so it’s in your best interest to uncover or divulge them first.
In our 20 years of doing Mergers and Acquisitions, we’ve learned that transparency is always the best policy.
- Being educated: Understand how wineries like yours are valued and sold so that there are no surprises, and you can sell when you’re ready for the best possible terms…
- Being honest: If we think you can get more, we’ll tell you. We’ll also tell you if we don’t think your winery will sell for your desired asking price, or for your desired terms.
- Being patient: Today might not be the best time to sell. We’ve helped some clients go from selling agreement to close in six months, and we’ve worked with some clients for up to ten years before they were ready to sell.
- Being systematic: Winery sales are unique. Selling a winery requires a systematic approach with well-defined timelines and processes.
- Being thorough: Everything should be out on the table before you or we contact potential buyers. We close engagements far faster than the industry average because we spend less time in due diligence. We’ve already got the answers to their questions.
- Being firm: Transparency doesn’t mean that you always cater to the buyer’s wishes. It means giving them the information they need to make a decision, and telling them when their request is irrelevant.