Selling Your Business – The Deal Killers
In planning for the sale of your business, there are generally several options that exist for a business owner: a family member, a key employee, another owner, a third-party, or liquidation of assets. Each of these potential buyers comes with its own set of issues. In negotiating the sale to a third party, the business owner needs to be aware of these common deal killers that can ruin a potential sale:• Failing to reconcile your idea of value with the market’s perspective on value PRIOR to negotiating with a buyer. Your business is worth what the market says it is worth. A business valuation can give you an understanding of what that may be before putting the business on the market. If the market doesn’t think it is worth what you think it is, you probably should not put the business up for sale. A failure to align your expectations to reality may result in the business being overvalued and your frustration when it won’t sell.• Focusing on sales price as opposed to net proceeds. Net proceeds are what you walk away with. This should number must align with what you determined it needed to be PRIOR to putting the business on the market. If you need $1 million and you sell the business for $1 million you are not going to get $1 million and it may kill the deal if you finally realize this during the negotiations.• Failure to determine how you exit the business without impacting the value. Systems, systems, systems. The value needs to be in the business not in you. If it is you, the buyer will need you to stay and it will significantly decrease what you will receive in terms of total price and increase your continuing risk after the sale.• Allowing emotions to enter the negotiations. This is a business deal! The buyer wants to pay the lowest price possible. Don’t get angry and don’t let it get personal.• Entering negotiations without preparation. Buyers are often sophisticated. They buy businesses for a living. They know the tricks. This may be the only time you ever do this. Get the help you need before the prospective buyer has you moving down the aisle of this marriage. It is always difficult to back track.• Failing to engage in pre-sale due diligence. In law school they teach us that we should never ask a question if we don’t already know the answer. Likewise, you should never put your business on the market if you have not already located and fixed all problems. The buyer will want to engage in due diligence. Figure out the concerns that are there and address them before the buyer requires you to do so. A sophisticated buyer will find them and they may derail the deal or at least affect the amount of money you will be receiving.Avoiding these deal killers won’t ensure success, but they will increase the odds of a successful transaction that meets your goals and objectives.