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Deal Killers: 5 “Do Not’s” for Selling a Company (Part 3)
So we agree, we’ve been negative nellies recently with this “do not” series. This is it! This is our third and final segment in our series on “Deal Killers.” What are Deal Killers? Things that we’ve seen time and again that keep a business owner from existing their company. See Part 1 and Part 2.
You’d be surprised by some of the comments we’ve heard from buyers when looking at a messy business. And by messy, we mean papers every where, disorganized work areas, etc. While a business is priced based on performance, it’s often some of the intangibles that get it sold. Just like dressing up a house before you sell it you must do the same for a company. When a buyer walks into a messy and disorganized business you can bet they are wondering if it’s even worth their time. This is an easy step to improve “saleability.”
DON’T TAKE YOUR FOOT OFF THE GAS
Sellers sometimes get so focused on a sale that they let off on running the business. Buyers want to see growth, and even a slight downturn during negotiations is going to cause a buyer so ask “what do they know that I don’t? Why are they REALLY selling?” The lesson here is the work hard to achieve consistent results until the check is in hand.
Tip: One of the key reasons for working with an intermediary is so that you don’t have to spend all your time on a sale.
BE PRO-ACTIVE IN YOUR EXIT PLANNING
One of our big concerns is always how much thought a seller has put into the post-transaction needs of their estate. The market is going to pay what the market pays for your company. But is it enough? It’s imperative to speak with a skilled financial advisor prior to getting deep into a deal.
Tip: Your CPA is the wrong tool for the task. Spend the time, find a top flight wealth manager, and work through an estate plan early.
THINK LIKE “DEAL MAKER”
Avoid drawing lines in the sand early in the sale. Many business owners have a predetermined idea of the value of their business explore a sale process, and have already determined that they will not sell at below that figure. As in any form of selling, selling a business is a process of give and take, and drawing a line in the sand, will usually set a barrier to going forward. Failure to keep an open mind is a sure way to kill a deal.
Tip: If you keep getting offers in the same range, the market is telling you something.