M&A transactions have increased lately. Savvy investors continue pinpointing great ventures to put their money in across industries. With billions in investment available, you might find this as the opportune time to finally sell.
Some entrepreneurs start their enterprises with an exit plan in mind. For others, the decision to sell comes along the way. Whether you want to head out for retirement or you are burnt out, there’s a great opportunity to cash in on your investment.
It is one of the toughest decisions you’ll have to make as an entrepreneur, but with careful planning, it can also be a rewarding choice. One of the biggest mistakes you can make when exiting is to sell the business yourself. Failure to hire professional M&A advisors in your exit could cost you a lot and make you lose the value of the investment.
Here are some reasons that prove selling your own company is a big mistake.
1. It is a Long Arduous Process
You have indeed built your business from scratch, and for this reason, you feel entitled to manage the sale. It is a valid point, but the question you should ask yourself is whether you have the time and energy to do it.
On average, a company sale takes months, and this can spill into years for some unique businesses. For instance, if you wish to sell a website or a SaaS business, you can expect a lot of back and forth during negotiations. Every task in the exit strategy takes time. From the business valuation, documentation, negotiations, due diligence to metrics tracking, there’s a lot of work to do.
It’s easy to let your eyes off the ball, which can affect the core business. With so much on your hands, you need a business broker to help you plan the exit. These professionals live for these deals, and they have all the time to do the job competently.
Many entrepreneurs who sell their own companies end up frustrated and in the process risk losing their investment. The last thing you want is to see your blood and toil go for a song. Working with an M&A professional saves you a lot of time and energy. It allows you to continue working on your business to make it more attractive to buyers.
2. You Don’t Know the Right Buyers
How do you narrow down on a buyer when selling your company? As an entrepreneur, you have no ready network of buyers which you can activate. In most cases, business owners start talking to family, friends and competitors when they sell their own businesses. These are not qualified buyers and they only waste your time.
A business transfer agent brings invaluable contacts into the deal. They know how to identify qualified buyers and shortlist them for negotiations. These buyers have a solid business history, verified financial capacity (capital or financing), and they understand the acquisition process. Good buyers ask the right questions and readily sign a non-disclosure agreement (NDA).
The business broker easily identifies tire kickers who sound enthusiastic about buying the business but have no capacity. These are buyers who lack the ability, means, urgency and desire to close the deal. Without expertise in selling businesses, you’ll waste a lot of time on this kind of buyers.
3. You Can’t Maintain Confidentiality
One of the key ingredients of a successful business sale is confidentiality. Unlike selling a house where you put up a ‘for sale’ sign, the case of a business is different. Whether you want to put up a traditional or online business for sale, you need to keep this information close to your chest to avoid creating uncertainty.
Letting the cat out of the bag can make your employees nervous, and customers might start walking away. The mention of a business sale sends the wrong impression even for a profitable enterprise. Your competitors can leverage such information to take customers from you while vendors and suppliers will tighten terms.
For these reasons, you need to maintain confidentiality. This is only possible when working with a business broker. These professionals create a buffer between you and the buyer. They also draft a non-disclosure agreement (NDA) which every serious buyer will sign willingly. This protects your business from any shocks and maintains its good performance.
4. You Don’t Have Prerequisite Marketing Skills
An established online business for sale advertisement might look like a good idea, but in most cases, it doesn’t work. Serious buyers expect the best deals from business transfer agents and M&A brokerage firms. These professionals look for the best deals from such professionals.
A business broker has the expertise to sell your business to the right buyers. You might know your company well, but marketing it for sale requires a new set of skills. The last thing you want is to send the impression that you’re desperate. When you try selling your own business, this is the impression you convey to buyers. There’s more scrutiny about the venture because everyone thinks it’s collapsing.
Your business representative takes over the marketing and uses different platforms to reach the target buyers. They know how to present value in your business to make it more attractive. It is these skills that guarantee a smoother exit event and most value for your investment.
5. There’s a Lot of Work in Selling a Business
Selling a business takes more than an advert and offer for purchase. Your advisor will take the time to understand your business and help draw a custom exit strategy. There’s a lot of work to do before taking the business to the market.
You will identify value drivers, business valuation, key metrics to consider in due diligence, drafting a letter of intent (LOI), preparing all documents, drafting the purchase and sale agreement, lease negotiations and a lot more work. After accepting an offer, this is where the real work starts, and you need the expertise of the M&A advisor to guide you through this.
Why You Need a Comprehensive Exit Strategy
Many entrepreneurs start the company sale process, convinced that they could handle the process. However, this doesn’t work out because in most cases, there’s no practical exit plan. Our team works with business owners to create a structured exit strategy for a smooth exit. Contact us today and let’s help you sell your company for what it’s worth.