There’s obviously a lot more than seven ways to wreck anything in life, not just business transactions. But over the years, we have seen some particular situations come up over and over again that need to be highlighted. We’ve divided them into things to keep in mind before the transaction begins and during the transaction.
Before the Transaction
1. Price appropriately
One way to pre-wreck a deal is to price inappropriately so that you don’t get any lookers, much less any offers. Remember that you’re rarely objective about anything you’re personally invested in, and as a business owner, you also probably don’t have the skillset or experience to know what your business is worth in a particular marketplace. Even if you’ve done some valuation calculations yourself, for best results, get a certified valuation. It makes the deal bankable and much more likely to go the distance.
2. Keep confidentiality
Loose lips sink ships. There’s a reason that saying has come down to our present day. Confidentiality means your employees don’t get scared off and your vendors don’t let something slip to the competition. It’s an exciting and momentous period in your life, no doubt, but you can talk about it to your heart’s content when the deal is done and the check has cleared the bank.
3. Be prepared
One of the more tiring but perhaps most necessary aspects of a business sale is the due diligence. We’ve talked about how important it is to have your company financials in order and your taxes up to date (and we’ve also shared stories of what happens when you don’t). You should have up to date paperwork because it will help you run your business better anyway, so get in the habit and you won’t have to do much more when it comes time for a sale.
4. Encourage competition
While ultimately you can only ever sell your business to one buyer, that’s no reason to only have one buyer competing to buy your business. Some of the best outcomes for everyone occur when there are multiple buyers battling for a business. As the seller you then get to evaluate the qualities of the buyers for fit with your business and the amount of their offer.
During the Transaction
5. Stay flexible
You should have your deal breakers clear in your mind throughout the process, but remember to think expansively and creatively about solutions when the buyer is making a demand. It doesn’t always have to be a binary “this for that” swap. Sometimes you can ask for something in the future or work out something with the real estate, or ask for a royalty. That doesn’t mean settling for a bad deal – it just means thinking positively rather than negatively about deal points.
6. Don’t lose momentum
It’s very simple: with delays, deals often die. Part of our jobs as brokers is to keep the ball rolling, making sure questions are answered, concerns are addressed, and technicalities are noted. Just as before the transaction begins you need to have your paperwork in order, when you’re in the transaction you need to keep the paperwork going. It can feel infinite at times, but we promise it’s not: see the light at the end of the tunnel.
7. Stay focused on your business
One of the advantages of having a broker is the chance for you to stay focused on your business instead of pouring all your time and resources into making a transaction happen. Remember that a buyer wants to see the business as a going concern from start to finish with you, and if your business deviates from the norm during the transaction that can often cause you to take a haircut on the closing price. You’re the owner until you’re not, so act appropriately.
The most successful sellers keep all seven of these ways in mind from the start to the conclusion of a transaction, but if you even have four of them clear in your mind when we get started, you’re well on your way to success.
Concerned about one of these in particular? Give us a call and let us know how we can help.