It often starts innocently enough, with someone expressing unsolicited interest in buying the business. The owner of the practice usually feels flattered by the attention, curious about what their practice is worth, and sometimes relieved, as they had been unsure how to exit plan. The conversation and courtship progresses and, before long, the seller is neck-deep in a one-on-one negotiation. No broker, no other buyers, no competitive bidding, no expert advice. Just one buyer, one conversation, and one path forward.
When a practice owner is only talking to one buyer like this ….and the buyer knows it…. the buyer is driving the transaction instead of the seller. In practice sales, we call this dynamic the tail wagging the dog, and it very rarely results in the best outcome for the seller.
- Undervaluation is all but guaranteed
Without competition, buyers make lowball offers with onerous terms, with no fear of missing out. They tell you confidently that they have done their market research and the offer that they have made is a great one, and that their finance won’t support a higher offer. The only thing that they are actually confident about, is that their narrative is the only one that the seller is listening to.
The buyer and seller may decide to get an independent valuation done. But how will either party know that the valuer knows what they are doing? Even if the valuer is reputable…How do they know that the valuation is fair?
- Auctions beat valuations in real estate all the time.
- Valuations aren’t the end of negotiation, they are the beginning. A buyer will still try to chip away at it, citing minor issues as justification for renegotiation.
- Without exposing the practice to competitive bids, sellers could be (and often are) giving buyers a gift of hundreds of thousands of dollars.
When there is a market process and competitive tension, the opposite happens. Buyers need to put their best offer forward or risk losing the practice to another buyer. Sellers accept offers with confidence, knowing that they aren’t leaving money on the table because they know what other buyers would pay.
- Buyers control the pace and timing of the deal
Without competition, buyers are complacent. They take their time assessing the practice and getting finance. They ask the vendor to be patient while they go on holiday, while their preferred financier is sick, their lawyer’s son is getting married and their accountant is too busy to look at things.
However, when the practice is being sold with competitive tension, the sale is done on the seller’s timeline (where it should be), NOT the buyer’s. When the practice is being sold with competition, the buyers can’t ignore the sale while they are on holiday…if they do, when they come back it will have been sold to someone else. If the buyer’s advisers are too busy, sick or otherwise unavailable when the deal is at hand…they find new advisors or lose the deal.
- The false economy of a private deal
Many buyers will try to convince sellers that selling to them off market will save them money on broker’s fees. But this narrow view overlooks the money lost on an off-market, single-buyer transaction: that is, the almost assured lower price, poorer terms, longer timelines and the opportunity cost of missed buyers.
A well-managed, competitive sale—run by experienced professionals—delivers net proceeds far greater than any fee savings. It protects the seller, maximises value, and ensures the deal structure supports their financial and personal goals.
Putting the Dog Back in Charge
In the end, sellers should remember: the business sale should be their process to lead, not the buyer’s. Smart sellers take control, get expert guidance, and run a structured process on their timeline to ensure that they can confidently accept the best possible outcome for them.
To let the buyer lead the process of your practice sale is to let the tail wag the dog.