Thinking about selling your company? While some sales may go off without a hitch, others flounder due to errors made by inexperienced brokers or owners who are not prepared to sell. In this blog, we’ll explore key pitfalls to avoid as you prepare your company for sale.
The sale isn’t over until it’s over, and the current owner has to remain fully engaged through closing. A sale can fail at any point in the process, and if a seller has set his or her expectations too high, they’ll be sorely disappointed if things don’t work out. Sellers should hold their emotions in check, while maintaining day-to-day operations and staying in close touch with their CGK advisor until closing is complete and final payment has been made.
Selling a business is a marathon, not a sprint. Sales can take up to a year in some cases; buyers may back out or lose interest, issues may come up through the due diligence process, so many factors are at play. As you can imagine, the due diligence can be a grueling process, requiring lots of prep for the owner and advisor. Owners should commit themselves to the long-term process of selling the business, and not expect a sale to happen overnight. Setting this expectation from the onset is important.
Entertaining the “Tire Kickers”
Unfortunately, some prospects aren’t really serious about buying a business, and they’ll never actually pull the trigger on a deal. This can cause the seller to waste their time and resources, and it can put the company’s sensitive information at risk. To prevent this from happening, CGK will make sure you’re protected with a solid NDA (non-disclosure agreement) as well as an arsenal of questions for potential buyers. Some of the questions to weed out serial “lookers” include:
- Why are they looking to purchase the business?
- Does the buyer seem viable?
- How will payment be made?
- Does the buyer have the experience to run the business?
- Is the buyer a competitor, a private equity firm, venture capital firm, or high-net-worth individual?
- Is it possible to speak with the buyer’s bank financing sources?
By asking these questions and carefully considering the answers, sellers can avoid the hassle and inconvenience of dealing with inauthentic buyers.
Allowing the Team to Find Out About the Sale
It’s important for sellers to not let their key employees know about the sale until it’s absolutely necessary. When bringing the company’s leadership into the sale, it should be done with clear confidentiality guidelines in place. With these steps, sellers can protect their businesses from the rumor mill’s destructive power.
Waiting Until the End of Your Career to Plan the Sale
Smart business owners know that it takes time to properly sell a business. They take immediate action to reduce the company’s reliance on any one key individual, including him or her, and they strengthen the brand in other ways. Finally, owners should work to resolve any nagging issues in their sales channels, customer base, and other operations before selling. The upside is that, even if the sale doesn’t go through, sellers have improved their business for the long run.
A Few Closing Thoughts
These are just a few of the key mistakes to avoid as you enter into the process of selling your company. For the most part, they are easy to avoid, as long as the seller follows the tips we mention and enlists the help of an experienced professional advisor. Call or email us below to schedule a free consultation, or visit our website for more details.