Since selling a business or conducting a family succession is often a once in a lifetime event, these are more frequent items that arise in the transition process.
Values. Developing an estimated value without consulting with an industry expert or conducting a business valuation. Depending on your industry, the process to establish a value may vary. Forming your own idea of a value estimate can lead to overpricing which can make it difficult to sell a company. Or the opposite can occur where an owner under estimates the value and leaves significant opportunity on the table.
Timelines. Underestimating an exit timeline. It can take six months to several years to prepare a business to sell. An additional four to eighteen months is a typical window to find the right buyer. These timelines are examples. The business itself, location, industry and general financial or regulatory issues can extend or shorten windows. The best plan is to anticipate it will take longer to identify and close the proper buyer or to train the family to take over.
Emotions. Mentally prepare for the transition. You cannot “test the waters” to see who may be interested and then tell a potential buyer you are not sure when you want to exit. You may only have a few interested parties and once you turn a buyer away, they are much more difficult to redevelop interest.
Leadership. Do not tell the buyer or succession team how they need to run the business. Provide guidance, but the new owners will want to run operations the way they want to do it. Over controlling comments will just send the buyers a signal that doing a deal with you might be very difficult.
Clarity. Minimize recasting financials. Telling a buyer profits are diluted by 10% because non-essential expenses are on the books reduces your value. This is often why a longer timeline is needed. You need time to have at least two years of the best financial position you can reflect, and it needs to be in your income statement and balance sheet. In addition, often audited financial statements are required by the buyer. Going back to audit a few years of financial statements can add material delays which then gives the buyer more time to potentially identify a different deal.
Brokers. They are essential. However, there are brokers who just list businesses like a house for sale and there are brokers/consultants that work to sell your business. There is a huge difference. Plus, if the understanding of you value is limited, it makes it easier for a business broker to sell at a lower price. Selling at a lower price minimally reduces the brokers fees, but it can materially impact the proceeds to the owners.