Top 10 Ways Selling Your Business Can Go Wrong
I came across this article from Axial that does a good job illustrating some of the pitfalls or challenges that can cause a deal to go sideways when trying to sell a business. Here are a brief description of the top ten ways selling your business can go wrong. To read the entire article click here.
1. Unrealistic Value Expectations
The number one reason deals fail to close is because a seller’s valuation expectations are too high.
2. Unclear Story Elements
Often, because of poor strategic planning, the business owner cannot articulate clearly the company’s competitive advantages, its growth opportunities, its revenue potential, and its ability to produce significant returns on invested capital.
3. Quality of Earnings
Audited financial statements confirm financial accuracy and help validate forecasted performance. Lack of clarity and visibility regarding key business drivers, sales pipeline backlogs, back office operations, and the consistency of growth and earnings inhibit a buyer’s enthusiasm to continue its due diligence.
4. Length of Time
Every deal has a life of its own and its own momentum. Recognizing the ebb and flow of the deal momentum is critical to deal success
6. Customer/Vendor Concentration
If a significant amount of revenues is concentrated in a few customers, or if critical supply chain raw materials are concentrated in one vendor, the buyer’s perception of risk is elevated substantially.
7. Renegotiating Terms of the Deal
Renegotiating the terms, conditions, structure, and representations and warranties of a settled deal can be a deal killer
8. Lack of Robust Internal Controls
Frequently, the buyer’s due diligence process will reveal sloppiness (or worse) in internal controls (e.g., weak collection processes for aged receivables, manufacturing error rates, aberrations in the financial statements, regulatory filing inconsistencies).
9. Reaching for the Last Dollar
It is completely understandable that sellers who have put everything into their business want to get every dollar they can out of their business.
10. Inadequate Advisors
Selecting a quality deal team is critical to deal success. Business owners are very good at building successful businesses, but often stumble when seeking to monetize them in some form of exit.
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