The 4 common mistakes which could derail your company sale
For many founders and business owners, selling their business is their ultimate goal. It’s what they’ve worked towards for years.
With the potential rewards so high, it’s not surprising there are plenty of things that can go wrong at the last minute and derail the sale process.
Certain issues crop up time and time again. Often these are relatively simple things that are easily avoidable with a little foresight and preparation.
In this month’s blog we’ve listed the top four things to watch out for when selling your business.
1 – Placing all your eggs in one basket
When a major goal is finally within reach, even the most level-headed business person can get a little excited or over optimistic and have their head turned by the first buyer that comes along. A savvy buyer will pick up on any over eagerness and take advantage when it comes to negotiations on price and terms.
You need to create competitive tension around your company. Ideally, you should identify the most likely buyers of your organisation well in advance of a sale and begin courting them and building relationships. That way, you already have the upper hand when the sale process starts.
Another option is to bring in a corporate finance advisor to help identify buyers and run the process for you. Having a trusted expert between you and a group of potential buyers can help give you the emotional distance you need to get maximum value.
2 - Losing momentum
There never seems to be enough hours in the day to run a business. When you throw the demands of selling your business into that mix it can all become overwhelming. Your time quickly gets eaten up by everyone from lawyers to accountants to advisors and bankers.
Getting distracted by the sale process can have a serious impact on business performance. A sudden dip in results opens up the opportunity for potential buyers to negotiate a price reduction or, in some cases, lose interest all together.
You must maintain momentum. You need someone dedicated to driving the selling process and someone else dedicated to the daily of running your business. Often the financial director focuses on the sale process, bringing in support for their day-to-day responsibilities, leaving the MD/CEO free to focus on running the business.
If you try to do everything, something will inevitably give.
3 - Having a loose grip on your finances
You can be sure that anyone in a position to buy your company, knows their onions when it comes to finance. If a buyer has a sense you don’t have a firm grip on your numbers, they’ll either take advantage by driving a harder bargain or they’ll lose confidence in the business.
Smaller businesses in particular are at risk of undervaluing their worth and not having the leverage they should when negotiating.
This is where good financial habits really pay off. A company with a solid understanding of its cash flow and financial future is hugely attractive to investors and buyers.
Producing monthly management accounts, taking a proactive approach to your finances and being fanatical about cash flow and forecasting is the best way to strengthen your hand with buyers. Always remember, information is power.
4 - A lack of solid advice
The sale process can be complicated and complex. Don’t be afraid to admit you could benefit from outside expertise. Insight and support from people who have been there before – especially multiple times – is invaluable.
The professional fees that may accompany bringing in specialists can seem eye-watering. But cutting corners here can be fatal. Whatever you might save hiring a high street lawyer, for example, may be offset by losing ten times more further down the line due to a lack of commercial experience, a mistake in the paperwork or a failure on a simple compliance matter.
If you plan to sell your business in future, don’t wait until your company is on the market before getting advice. Get outside help early. At ValueMaker, we will help you shape your business well in advance of considering a sale, to put you in the best possible position to realise your ambitions.
We can also tap into a wide range of experts with the right connections. These people will bring huge value to the sale process and ensure you can negotiate the best possible sale position, while also mitigating against future liabilities or potential issues down the line. Get in touch here.
If you’ve come so far down the road to selling your business, don’t waste the opportunity by falling victim to one of the four mistakes listed above.
The ValueMaker team have all successfully grown and sold businesses from the inside. We know how to drive you forward and how it feels to be in your shoes.
We work exclusively with owner-managers who want to build and sell, with a long-term investment approach. And, thanks to our unique approach to fees and equity, you needn’t have a large cash reserve to benefit from our support. Get in touch with us to find out how we can help you reach your goals: firstname.lastname@example.org