|
[Editor's note: We
have helped over 40 clients add value, prepare for a sales transaction, and
execute successful transactions, ranging from $6MM to $350MM. Several
business owners have asked us about this topic so we decided to publish
this article again. - DPM]
Common
misconceptions about selling a business
It appears that we may be entering the next big surge in
business transition activity fueled not only by the retirement needs of
aging baby boomers, but also very successfukl growth for businesses over
the last decade. The first baby boomers turned 75 years of age in 2020 and
we are have entered the years with greatest numbers of boomers.
If you are a business owner contemplating a sale somewhere in
your future, consider these common misconceptions about selling your
business.
·
I know the buyer - they are in my industry. Many business owners think they already know
the prospective buyers - from their industry. However, in many cases
where a sales process is conducted by an investment banker, an
"outlier" (either a strategic or financial buyer) surfaces with
an offer significantly higher than from those you may know. Many times
these come from outside your industry.
·
The market will be better next year. Procrastination can cost you. Sellers in
1999 or 2007 or 202 0 will tell you that they wished they had sold while
the market was hot.
·
I don't want to sell until I have to (Dismal D's). You want to sell when your business is
healthy and when you don't have to sell. Life can take cruel twists and
turns. Business owners without a plan can find themselves subject to the
"Dismal D's" - Death, Disability, Divorce, Dissenting Owners,
Declining market, Debt overload, or just pure burnout. It is hard work to
sell your business. You'll need plenty of energy and motivation to maintain
performance during the sales process.
·
The investment banker or M and A firm will build
value. No they won't -
that's not their job! A good investment banker can help you yield value,
attract a broader market of potential buyers and get a deal closed, but
they don't have the skills or background to build value. Some small M
and A firms will offer services and advice in order to get your
transactional business, but these are either young, inexperienced
associates or people who have not really run a business. They are very good
at selling your business, but what they don't know can hurt you. Beware of
these firms that pitch themselves as one-stop shops.
·
My lawyer (or CPA) (or Wealth Manager) will help me find a
buyer. Finding a buyer is very different than
finding the best buyer, the right buyer. Investment
bankers do this every day. Most professionals understand what they do
well....and what they don't. Find the right tool for the job!
·
I met a guy in my CEO peer group /My investors know a banking
firm. Selling your
business may be your most important business decision. Get help in making
an informed decision about selecting an investment banker or other
professionals such as accountants, tax counsel, and transaction attorneys.
Learn about possible (but undisclosed) conflicts of interest, differences
between firms, level of expertise that will work on your company,
etc. Have you checked with previous clients that were both successful
and unsuccessful? Mead Consulting clients use a checklist of questions to
help make the appropriate choice.
·
It only takes 6-12 months to exit a business. Nothing could be further from the truth. In
order to realize the maximum value it may take you 1-2 years to prepare the
business, 12 months to do the transaction, and then you may have to remain
for up to 3 more years with the company after the sale. Rushing a company
to market without proper preparation will cost you as buyers will discount
values for companies without an adequate strategic growth plan, diverse
customer base, strong management, or a clean review of due diligence
issues.
·
Selling will only take some of my time. The biggest mistake business owners can make
is to allow business performance to slip during a sales process. The
primary reason for deals to either fall apart - or become heavily
discounted - is because of deterioration of revenue and earnings. Business
owners can dramatically underestimate the amount of time and energy it will
take to both sell the business and maintain performance during the process.
The Mead Consulting Group helps business owners navigate through
a successful sales process, including preparation, selection of the team
(investment bankers, transaction attorneys, tax counsel, etc.), and the
sale process itself. We focus on maximizing value and leverage the business owner's and
management's time so that they can focus on maintaining business
performance. Contact us for more information.
Best regards,
Dave Mead
|
No comments:
Post a Comment