Selling a business is a massive undertaking. Even owners with significant experience selling their products and services are not business M&A experts. Yet many think they can intelligently manage the process on their own. This is why hiring a skilled M&A firm as early in the process as possible is so vital to a successful sale. Here are some of the most common mistakes owners make without expert guidance.
Not Having a Plan
Selling a company is about more than just putting it on the market and negotiating for the highest possible sale price. Owners must have a clear plan in mind—why they want to sell, to whom they hope to sell, what they want to do next. If any of these elements are absent, it can be difficult to recruit interested buyers, and even harder to thoughtfully negotiate the sale.
Valuation Issues
Everyone wants to sell their business for top dollar. But if it were as simple as getting out the effort an owner puts in, every company would be selling for a premium. Working long and hard at a company offers no guarantee of a high valuation. Owners need professional valuation guidance early in the process, both to set reasonable expectations and identify strategies for generating additional value.
Overestimating Growth and Profits
Business buyers are investing in their own future. They crave a vision of growth coupled with security. It’s the owner’s job to deliver that. But many owners make false, exaggerated promises based on unrealistic projections. Forecasting must be based on actual data, and reliable methodologies, or else buyers will ignore it out of hand.
Inadequate Due Diligence Preparation
No buyer is going to make a purchase based on the owner’s assurances alone. Due diligence gives sellers the chance to back up their claims with evidence, but too few enter the process well prepared. Well-tended books, rapid responses to due diligence requests, and expert oversight can all help the process go more smoothly.
Deficient Integration Planning
For a merger to succeed, there must be significant thoughtful integration planning. This isn’t up to the owner alone, and the owner may have no say if they’re walking away on day one. But often, owner’s consent to earnouts or to remain on board as consultants. Thus, the success of the new entity determines how much money the owner earns. Mergers are more likely to fall apart when there is an inadequate integration plan, a failure to merge cultures, or weak communication. Owners must work with buyers to develop a thoughtful integration plan that protects both parties’ interests.
Owners need sage advice from well-informed M&A firms. This expert insight can disabuse owners of harmful myths and misconceptions that can undermine the success of the sale. Early intervention here is key. The sooner an owner talks to an expert, the better positioned they are to take steps that improve their prospects for a successful sale. Contact us today to learn how we can help!