Rarely does a technical or paperwork glitch derail the sale of a business. Much more frequently behavioral or emotional decisions by the owner taint the market or cause the buyer to rethink things. This makes sense because the sale of a business is the culmination of a lifetime of work, and it is unreasonable to expect an owner to think or act dispassionately. This is where the real value of utilizing a team of experienced professionals to help you capitalize on your life’s work comes in. Though there are entire books written on the subject, what follows are ten common but easily rectified “Deal Killers.”
It is often admirable or even prudent to test the waters before diving in. Not so when selling your business. A gaffed first attempt has the potential to taint market perception of your business. When you are ready, plan and act decisively.
2. Negotiating Alone
Savvy people from Fortune 500 CEOs to Military Generals consistently repeat a key mantra: it is the people they surround themselves with that create outstanding results. The same is true of selling your business. It is often impossible for an owner to act completely rationally when haggling over something they poured blood, sweat, and tears into. Let your team form the buffer between you and the buyer to ensure a successful exit.
3. Poor or No Preparation
This killer is often a “maimer.” A deal may still go through, but an owner who does not plan, increase transferrable value, and tie up loose ends will leave money on the table every time.
4. Keeping Secrets from Your Advisor
All companies have blemishes. The process of exposing them and creatively finding solutions should be completed amongst your team prior to going to market to avoid losing money during the Due Diligence Process.
5. Keeping Secrets from the Buyer
An extension to number 4, this issue has the potential to derail a deal entirely. Rest assured that any Due Diligence Process will be thorough, and the buyer will be actively looking for ways to decrease the sale price. Everything will come to light, and your best hope is to disclose and deal with issues prior to signing a LOI.
6. Working with the Buyer Directly
Your team will develop a negotiating strategy that requires coordination. Going rogue and approaching the buyer will only serve to unbalance the scales at the negotiating table.
The Exit Process is grueling and emotional. It is easy to get distracted from the day-to-day operation of your business – don’t! Your team is there to move the process along, and your part is to continue to create value as you have over the course of your career.
8. Overlooking Consents
In every business there are a multitude of third parties who would like (and often are required by law to give) consent if you wish to sell your business. Be diligent in creating a list and contacting all appropriate parties.
Believe it or not, confidentiality breaches are usually caused by the Seller. No matter how good a friend or colleague someone may be, keep confidentiality during the process as you never know what facts can materially affect the deal.
We are all here for the same reason. You want to capitalize on a lifetime of hard work, your team wants you to have a successful exit, the buyer wants to acquire a successful business. There is an old saying that if a deal has not been derailed at least four times in the process, it isn’t a real deal. Keep focused on the end goal and don’t let details or setbacks cloud your thinking.