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Selling your business is the most important business transaction you will ever make. Mistakes in this process can greatly erode your transaction proceeds. Do not spend twenty years of your toil and skill building your business like a pro only to exit like an amateur. Below are ten common mistakes to avoid:
1. Selling because of an unsolicited offer to buy - One of the most common reasons owners tell us they sold their business was they got an offer from a competitor. If they previously were not considering this business sale, the owner has probably not taken some important personal and business steps to exit on his terms. The business may have some easily correctable issues that could detract from its value. The owner may not have prepared for an identity and lifestyle to replace the void caused by his separation from his company. If you are prepared, you are more likely to exit on your own terms.
2. Poor books and records - Business owners wear many hats. Sometimes they become so focused on running the business that they are lax in financial record keeping. A buyer is going to do a comprehensive look into your financial records. If they are done poorly, the buyer loses confidence in what he is buying and his perception of risk increases. If he finds some negative surprises late in the process, the purchase price adjustments can be harsh. The transaction value is often attacked well beyond the economic impact of the surprise. Get a good accountant to do your books.
3. Going it alone - The business owner may be the foremost expert in his business, but it is likely that his business sale will be a once in a lifetime occurrence. Mistakes at this juncture have a huge impact. Do you understand the difference in after tax proceeds between an asset sale and a stock sale? Your everyday bookkeeper may not, but a tax accountant surely does. Is your business attorney familiar with business sales legal work? Would he advise you properly on Reps and Warranties that will be in the purchase agreement? Your buyer's team will have this experience. Your team should match that experience of it will cost you way more than their fees.
Dave Kauppi is a Merger and Acquisition Advisor with Mid Market Capital, Inc. MMC is a private investment banking and business broker firm specializing in providing corporate finance and business intermediary services to entrepreneurs and middle market corporate clients in a variety of industries. The firm counsels clients in the areas of M&A and divestiture, family business succession planning, valuations, minority interest shareholder sales, business sales and business acquisition. Dave is a Certified Business Intermediary (CBI), a licensed business broker, and a member of IBBA (International Business Brokers Association) and the MBBI (Midwest Business Brokers and Intermediaries). Contact Dave Kauppi at (630) 325-0123, email davekauppi@midmarkcap.com or visit our Web page www.midmarkcap.com.
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