From time to time this author has discouraged private company owners from reading the Wall Street Journal. The reason is that the WSJ often crosses over between macro public capital markets and the more micro private capital markets without providing appropriate distinctions.

The integration of these two distinctly different markets only creates confusion and trepidation for the private company owner. The evidence of that is that many private business owners divine values for their companies that have nothing to do with the value world into which they will have to sell to create a liquidity event.

While a WSJ story may be about a public company who has sold off a widget division to a large private equity group, the private owner operating in the lower middle market of the widget sector believes that the same multiples of EBITDA should apply to his relatively small firm. They are as distinctly different as the old apple and orange comparison. The value worlds are not the same.

Today (8 January 2007) WSJ writer Arden Dale has penned a superb article titled, “Want to sell a business? You may not be ready.” The article deals with the issues that a privately owned company must deal with in anticipation of the sale of their firm. Mr. Dale’s WSJ article provides a wealth of clear and direct information that every private company owner should analyze and assimilate.

One of the scenarios in the story highlights the error of many unknowing private company owners. One of the characters, who discovered it would take longer to sell then anticipated, interviewed five investment bankers (IB). In his naiveté he chose an IB that specialized in transactions in his sector. While that seems logical to one who is unknowing, this seller may have left millions on the table.

The truth of the matter is that IBs who specialize in sectors also specialize in knowing the capital sources that buy in that sector. Although this is a convenient business model for the IBs, it does not necessarily generate the highest offers for the seller. Why might this assertion be true?

The likelihood of the truth of this statement is high in that the majority of sector specialists IBs are transaction motivated. Hence while one foot is in the house of one seller for that transaction, the other foot may be in a buyer’s house for this transaction and those to come in the future. While the naive private company owner has satisfied some logical fallacy by choosing a sector specialist, he has, with little doubt, left money either on the table or outside of the gate.

Bravo Arden Dale for a terrific WSJ article. And, a special thanks to two business associates and friends, Mr. Barry Horwitz of Horwitz and Company, an exemplary strategy and business plan consulting firm and Mr. Stephen J. Adams, The Regional Advocate for the Small Business Administration who always has his eyes open for ways to empower we small business folks.

www.hamiltonwright.com