3 reasons why you won’t sell your business.(And the solutions, so that you can avoid the most common mistakes).

Selling your business?You’re probably already thinking about how to attract buyers...

But have you taken steps to prevent them from being put off?

There are a number of pitfalls that can hinder and even prevent a deal from happening at all.

Here are the top 3 to avoid...

Are you pivotal to the success of your business?

If the answer is yes, your business will struggle to attract buyers.

Acquirers need to know that the business will still run smoothly when you’re gone, so you must start lessening its dependency on you well in advance. Some key ways to do this are...

1. You’re too important

a) Build a reliable management teamStudies show that companies with a second tier management team are getting offers at almost twice the rate of those without one.

Why is this?

Acquirers value a well-trained internal management team as it ensures that the company will continue to prosper without you.

It also reduces the cost of replacing you with new key staff.

b) Transfer your knowledgeIt’s absolutely essential to a buyer that you don’t leave the business with key information “in your head”.

So you’ll need to find a way to pass on this key information to your staff or the buyer.

This could be done on paper, or you may want to incorporate the transfer of this information into the training of your management team.

2. You have an unrealistic idea of its value

It’s not uncommon for business owners to overvalue their company, and miss out on a perfectly good deal as a result.

Common reasons for overvaluing include:

a) AttachmentYou’ve put precious time and effort into growing your company, so it can be hard not to take this into consideration when valuing it.

Remember that it’s solely the end product and its potential that is being valued – not how much work you put into it.

b) Denial

Weaknesses in your business can sometimes be hard to recognise or confront. But the reality is that your buyer will notice, whether now or down the line during due diligence.

It’s important to look at your business with a critical eye and be honest with yourself about its limitations.

c) FearAs psychologists know, most people fear loss more than they desire gain.

Thus fear of underselling may cause a vendor to overvalue, even at the risk of putting off buyers.

3. You’ve fa

iled

to plan

Preparing your business for sale well in advance can increase your chances of securing a rewarding deal.

On the other hand, a poor or non-existent exit plan will result in stress, unnecessary costs, and sometimes failure to sell at all.

Here are a few examples of how poor planning can hinder - and even prevent - a sale:

a) Shareholders don’t share the same view

Imagine getting a decent offer on the table – only to discover that one of your shareholders has a blocking position and won’t accept the deal!

An essential part of the planning process is to ensure that all shareholders have the same view on what price they would accept.

b) Paperwork isn’t in order

Are your company’s accounts and legal affairs up to date?

We’ve conducted a survey of attendees at over 50 of our Business Exit Strategies Seminars, and found that – despite considering an exit – 70% had not yet prepared their business’ accounts for a sale.

Rectifying this at the last minute is costly and time consuming, and can often result in the buyer being put off.

c) Undocumented growth plansWhile it might be sufficient for your own purposes to have your plan documented loosely, this will not impress buyers.

If you want to sell your business and its prospects to a third party, you must have your vision for its growth properly articulated in a plan.

So – are you able to sell?Hopefully you now have a better idea of how to avoid common mistakes that could lose you a good buyer.

We like to talk.

We specialise in selling unquoted owner-managed businesses. We help our clients maximise the price of their business and negotiate favourable deal terms.

Get in touch if you want to learn more about how to plan for a successful sale.

+44 (0)1223 728 222

info@pemcf.com