Below is a summary of some of the potential hazards of handling the sale of your own business:
- Limiting the buyer universe: An owner will tend to focus on only one or two possible types of buyers, usually direct competitors or customers. Unfortunately, such an approach could very likely leave out many potential buyers not readily known by management.
- Creating bad blood: Negotiations can be a very turbulent process, causing bad feelings and bruised egos. An advisor is able to act as a buffer between the buyer and seller, playing the ‘bad guy’ or being the scapegoat, if necessary.
- Being caught off-guard: By limiting the direct contact between you and the buyer, an advisor can protect you from the pressure to respond without proper consideration. Additionally, an advisor can offer a compromise during negotiations without being committed to it, to gauge the buyer’s reaction. By negotiating directly, you would forego this advantage.
- Lacking credibility: The involvement of a business broker in managing a professional sale process sends a clear message to potential buyers that there will be competition; that delay, or similar tactics will be ineffective; and that pertinent information will be carefully prepared and presented.
7. Favoring The Fast Track
Letting one attractive buyer get on the ‘fast track’, far ahead of the buyer pack, will cause you to lose your greatest weapon: competition from other bidders. The key is to build competition, to force buyers along your schedule and not theirs. A good advisor will know when the time is right to sit down and hammer out a deal with the buyer.
8. Sparing The Bad News
No one likes to be the bearer of bad news – particularly when the news contains potentially damaging information about a company that is for sale, or reports about the company’s key players. Unfortunately, the later bad news becomes public, the greater the threat of derailing the entire deal. By addressing bad news up front, you can establish a strong case and avoid potentially damaging innuendo. Negative reports can certainly influence overall valuation, but cover-ups or omissions, which will undoubtedly be discovered during buyer due diligence, could easily result in a broken deal that no price adjustment can repair.
9. Information Leaks
More than likely, you are not going to be able to keep the fact that you are selling the business a secret. It is best to avoid conflicts and protect your credibility by being direct with employees and key customers about the news, on your own terms.
10. Rushing To Market
If you are looking to maximize your company’s value, overcome the disruptive effects of a sale, and cash-in when it is all over, don’t expect it to happen as an overnight event. In addition, strong financial reporting systems and historical statements (preferably audited) are essential. They must support the financial data presented to potential buyers, and ensure that all the required documentation is available when it is required.
In Summary, selling your business is a difficult, complex and stressful process and not something you should undertake lightly. You should make every effort to prepare your business to ensure it is sold successfully the first time. Preparation and planning are the critical success factors in all business sales.