Avoiding the Biggest Deal Killer When Selling Your Business: TIME
Takeaway: The key to a successful deal is to prepare well, come out strong and maintain momentum throughout the business sale process.
When selling a business, time is not your friend. Time is the enemy of all deals. In fact, “time wounds all deals” is an expression that can be associated with a number of different industries, but is especially relevant to business acquisitions. So, the key to a successful deal is to prepare well, come out strong and maintain momentum throughout the business sale process. The deal clock is set in motion as soon as your company hits the business-for-sale market, not later in the process when a buyer presents the first offer.
So, to generate deal momentum, a business owner should be ready for the trip to the marketplace before the train leaves the station. This means organize your documentation and vet potential roadblocks that can derail or delay reaching the done-deal destination. IAG M&A Advisors prepares the seller to enter the market fully ready to present their best face to potential buyers.
Don’t let time work against you. Ready up with these 14 karats of knowledge so when the sale train does leave the station, it will have the momentum necessary to reach a timely closing:
14 Karats of Knowledge
1. Know when it is a good time to sell YOUR Business. Usually, the best time to sell is when sales and profits have been increasing each year and signs indicate the trend will continue. Current market conditions also play a role in prices paid for good businesses. Since “today’s market offers the best environment for small business sales that we’ve seen in years,” selling a little early in order to ride the rails of a good market may be a better risk than waiting for the next train that may never come. Lance Tullius, managing partner of Tullius Partners, spells out the all-too-familiar scenario of waiting too long in his article, “Sell Too Early.” The adage in selling a business is “It’s never too early and often too late” to start the exit process. It takes time to prepare a business for market and it takes time to find the right buyer and negotiate a deal that is a win-win scenario for both the seller and the buyer. IAG M&A Advisors makes that happen by properly preparing the business to go to market and making sure buyers are qualified and serious as well as assisting in the process from start to finish with professionals who are experienced to help buyer and seller cross the finish line successfully.
2. Know why you want to sell. A committed resolve to sell is essential. One of the first questions buyers ask is, “Why are you selling?” They ask this question to measure, in their minds, the probability that there may be skeletons in the closet. IAG M&A Advisors helps present the reasons for selling in a positive manner that makes sense to buyers.
3. Know the company’s best features and its Value – Yes, highlighting the awesomeness of your business should take center stage. But no company is perfect. Be ready to disclose the warts, too. Buyers do not like surprises, nor do business brokers or other members of the professional team involved in the sale process. Problems uncovered late impugn your integrity and threaten the price—and the deal. The more issues brought to the table and worked out in advance, the better chance of a smooth closing. IAG M&A Advisors professional valuation and offering memorandum vendors make sure the cover all of these potential quagmires and present them in the best possible light to avoid surprises or upset buyer prospects.
4. Know what you will do after your business is Sold – If you don’t have a plan in mind, you might find yourself getting cold feet or feeling a little off balance when that first offer comes along. Be sure you won’t balk when momentum starts picking up.
5. Know the value of your Business. Get a business valuation by a reputable firm to understand what to expect in the current marketplace. This is an initial step in determining if the sale would meet your objectives. IAG M&A Advisors has certified outside, unbiased, professional valuation firms provide sellers valuation of their business from multiple approaches so the seller is going to attract buyers who won’t otherwise waste time with sellers who vastly overprice their businesses.
6. Know that your asking price is based on .. a reality that buyers and their lenders can believe in. The buyer will look at return on investment and their lenders will require that the deal make sense in terms of debt repayment. Over-priced businesses do not get sold. See the comment above.
7. Know that you are current on all of your taxes. This includes sales taxes, unemployment taxes, payroll taxes, state income taxes and federal income taxes. Delinquencies in taxes of any kind can stop a deal in its tracks. IAG M&A Advisors addresses matters like this with its clients and handles most questions from prospective buyers to defuse any ill-will.
8. Know that operational details are not just in your head. Buyers want organized records, files, contracts, policies, employee records, training manuals, how-to manuals, business processes, systems and controls that are reliable and organized to keep things going after you’re IAG M&A Advisors can help with this as well. There is a Data Analysis package available that organizes all your business information in a professional presentation.
9. Know that your business can operate without You. The value of a business is built upon the sustainability of operations without its leader. Key employees and staff who run daily operations are the vital to its future. Most businesses are unsellable if the owner is the business. IAG M&A Advisors understands that there are businesses that can operate without the owner’s direct participation and those that cannot and helps buyers and sellers handle that by negotiating participation with the seller after the sale while the buyer learns how to replace the seller’s contributions to that business.
10. Know who you are, who you are like, and who your competition is. Buyers will survey your company’s landscape to scope its position in the market.
11. Know your numbers. Be able to provide accurate financial statements and tax returns and produce key financial reports and performance metrics. IAG M&A Advisors is very strong in this area, professionally recasting your financials to show what is real and what is not, to present to buyers what they need to know versus what may show on financials that are designed to reduce profit and, thereby, reduce their tax basis. There is ongoing discussion with seller clients, and they will have the knowledge and the numbers to present to buyers.
12. Know that your team is ready. Be sure that your trusted advisors will be able to assist you in the transaction. A meeting with your attorney and accountant, for instance, will play a role in gathering all necessary documents for your business broker before going to market. Your team of advisors nee dtime for preparation in order to effectively support you in the transaction. IAG M&A Advisors have all of the needed staff for your team, from valuation, professional recasting, presentation materials, transaction specialists, the ability to obtain financing for buyers, and more.
13. Know that you can provide the road map to even greener pastures. Buyers are interested in the future. A growth plan and marketing plan will help a prospective buyer understand where opportunities exist and what could be done to take the business to the next level. IAG M&A Advisors can also provide an Optimization Plan for the business that would show a potential buyer that plans are in place to scale the business to the next plateau.
14. Know what’s most important to you in the grand bargain. Be prepared for the pull and tug. Don’t get bogged down in minor details. Stay focused on your key issues. Understand your absolutes vs. wishes. IAG M&A Advisors Transaction Specialists understand that buyer and seller often have different priorities and they are experts at handling potential conflicts before they make a deal impossible and provide the kind of unbiased feedback to both seller and buyer that enables them to keep their eye on the goal of acquiring or selling the business where both buyer and seller win in the process.
Such preparedness will go a long way while negotiating the different scenarios on price and terms. How the deal is structured to meet the needs of buyer and seller can make or break a transaction.
There are many aspects to consider when selling your business, make sure you have every part covered by signing up with IAG today!