These are the ten problem areas when trying to sell a business. We have created a process that minimizes or eliminates every one of these deal killers to ensure a smoother transaction.
1. Valuation Issues
Unrealistic seller expectations because they truly do not understand the current market or what buyers find attractive in a company for sale.
2. Not Hiring the Proper Professional Advisors
A successful transaction will involve professionals like CPA’s and Attorneys. When those professionals do not have M&A experience, it can take much longer for the transaction to process causing fees to rise and/or “Deal Fatigue” where the buyer drops out.
3. Decline in Operating Results
Once a seller has a potential buyer in the pipeline, they may get distracted and mentally take their “eye off the ball” causing operations and cash flow to suffer, which ultimately affects the final offer.
4. Parties are Not Legitimate
90% of those who consider buying a company, never follow through. Many buyers may be “tire kickers” or worse, your competition looking for intel.
5. Culture Mismatch
The culture or personality of a company matters. Ignoring that fact, can open you up to a potential buyer who will eventually fail.
6. Improper Accounting Records
Accurate and complete books are a must have. It’s also crucial to clean up co-mingle funds and other “add backs” that may slow down or stop an offer.
7. Conflicting Tax Impacts on Buyer and Seller
Understanding the tax implications of a sales transaction is crucial to a transaction and can cause disagreement over purchase price allocations.
8. Not Planning Far Enough in Advance
Successfully exiting your company (right time, right buyer, right price) is far more difficult than the start-up phase. And it requires a 2 to 3-year timeline to plan and execute.
9. Not Articulating the True Value
Without the proper skills and experience it’s difficult for a seller to fully understand and articulate the company “value” to a buyer, creating low or no offers.
10. Company Specific Risks & Dependencies
Not addressing or mitigating risks or needs that the company has doesn’t make them go away. Instead they stop deals cold during the due-diligence process.