8 Deal Killers for Your Sell-Side Transaction
Planning to sell your business? Anxious about the current market conditions and how they’ll affect your business valuation? Your aim is to maximize valuation and avoid mistakes that will kill your sale. Deal killers are conditions that affect a business’s salability if they’re left unresolved before starting the business sale process.
Business sales should be more than just a leap of faith. You should benefit financially from the sale, considering you built the company from the ground up. When selling your life’s work, you should have a winning strategy because things don’t always turn out as you anticipated.
Let’s dive in and find out the deal killers you should be on the lookout for.
1. Failing to Show Economic Benefit to the Buyer
Even though as a business owner, you know the value of your business, the buyer cannot take your word for it. You need to show potential buyers the economic value of your business to convince them that it’s a worthy purchase.
Find out what your buyer wants in a business. Once you do, establish a synergy between what they’re looking for and what your business is offering.
2. Under Performance of the Business
Even though the transaction process is usually long and energy-consuming, you should not shift your focus from your business operation during this time.
Ensure your day-to-day operations are smooth as they have always been. When your business starts underperforming, your buyer will not only lose faith, but the company will lose value as well. Your business should meet the buyer’s projection throughout the transaction process.
3. Lengthy Transaction Process
We have already established that the transaction can take time, but this doesn’t mean you shouldn’t try to speed it up. Make sure that you avoid any delays that will stretch the time even further.
Here are tips to help you shorten the transaction process;
- Provide all information the buyer needs as soon as possible
- Set deadlines and ensure your team understands how important this process is
4. Not Using a Qualified M&A Broker
To receive maximum value for your business, you need to have a qualified M&A broker by your side. A brokerage team that has experience in your industry will ensure you have your perfect exit.
5. Discrepancies During Due Diligence
Even before you start a sell-side deal, make sure your business’ finances are in order. Accounting discrepancies are a huge red flag for buyers because no one wants to take over a business that has a questionable financial history.
6. Seller’s Remorse
It’s not uncommon to get cold feet when the deal is almost getting closed. However, do not let your emotions affect the transaction. You can always reach out to your friends and family to talk you off the ledge.
7. Failure to Preserve a Company’s Most Valuable Asset
As you sell your company, bear in mind that key employees played a significant role in the success of the business. Makes sure that these employees do not jump ship when you leave.
8. Failure to Reconcile your Perceived Business Value with the Market’s Perspective of Value
You need to get a sale-price estimate before going to the market. Pre-sale planning saves you from unpleasant surprises when you’re negotiating with buyers.
Conclusion
Selling the business you’ve built from the ground up is not an easy thing to do. Even if it’s valuable, you need to prove it to potential buyers. Throughout the transaction process, ensure the business still runs as smoothly as possible. This way, they won’t lose faith in it and back out before the deal is closed.
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