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4 Mistakes You Must Avoid When Selling A Business

By Generational Equity

M&A Mistakes

I recently came across an article published on Axial that was guest written by a fellow who had sold three companies that he owned over the past few years.

I always love these “inside the deal” looks because there really is only one way to experience an M&A transaction: Go through it!

Unfortunately far too many, like Giff Constable, learn how to sell a company while making a boatload of mistakes. To aid other entrepreneurs, Mr. Constable penned an exceptional piece narrowing the plethora of mistakes most “going solo” business sellers make down to four major ones:

  1. My buddy Joe got 10x for his business, so I can too (never forget that most buddies embellish the multiple).
     
  2. I might be worth X today, so I’ll be worth much more tomorrow.
     
  3. I know how to sell — why do I need an M&A Advisor?
     
  4. I’ll talk to buyers when it is time to sell.

Constable calls these “CEO self-deceptions,” and they are far too easy to fall into and have dangerous impacts on selling a business.

Of these, the last two go hand-in-hand. Taking the last one: You can wait to talk to buyers “when the time is right.” BUT how do you know the time is right?

Keep this in mind:

There are two kinds of sellers – those that HAVE to sell and those that PLAN to sell

Too many business owners only know that it is time to sell when one of the big Ds force them to talk to buyers:

  • Death
  • Disagreement among partners
  • Divorce
  • Disinterest (owner burnout)
  • Disinterest (the kids don’t want the business)
  • Downturn in the business

We hear horror stories about these every week at our exit planning conferences. Sadly, by the time an owner is in the midst of one of these, it is a fire sale and any buyer will do. So, it is far better to PLAN to sell your business than wait until negative circumstances force your hand. The key to this is:

Get started early!

Start Early to Avoid the Crucial Mistakes When Selling a Business

It is never too early to avoid the third mistake above by hiring a professional M&A advisory firm.

Why?

The reality is that the professional process to selling a business, which gives you the best chance of achieving maximum value when you exit, can take 9-14 months to complete. That’s because it is comprised of several key steps:

  1. Initial Business Valuation to Determine the Current Economic Value
  2. Value Enhancement Strategies Designed to Build the Company's Value
  3. Creating the Optimal Buyer Profile
  4. Finding the Optimal Buyers
  5. Marketing the Company to These Buyers
  6. Getting NDAs
  7. Getting LOIs
  8. Due Diligence
  9. Negotiations
  10. Deal Close

And while these are going on, YOU NEED TO KEEP FOCUSING ON RUNNING YOUR COMPANY.

I bolded and capped the last sentence because it really is why you need to hire an M&A firm to guide you through selling your company. If you take your eye off the proverbial ball, you could literally lose millions of dollars off the offer you receive by missing your projected numbers.

So as much as you can, avoid all four of these mistakes:

  • Don’t assume because a friend managed to sell for a significant multiple you will too
     
  • Don’t expect the value of your business will necessarily be better tomorrow than it is today
     
  • Don’t blindly walk into selling your business without experienced, professional guidance
     
  • Don’t wait until you HAVE to sell before you find potential buyers

Special thanks to Axial and Giff Constable for doing such a great job outlining these.

We expand on these and many more mistakes when selling a business in greater detail at our complimentary exit planning conferences. It is just one of the many topics we examine in detail during this comprehensive education on how and when to exit for maximum value.

Interested in learning more? Follow these links:

By Carl Doerksen, Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC. All Rights Reserved.

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Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!
JoAnn Ellis, Owner of Fondren 5 Star Kennels
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.
Salvo Stoch, Founder and CEO of Sleeping Partners
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.
Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Betty L. Brennan, President, Taylor Studios
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.
Shane and Johanna Kline, Owners of Vision Upfitters
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.
JoAnn Ellis, Owner of Fondren 5 Star Kennels
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.
Rick Greene of Dobbs Equity Partners LLC
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Jay Dinnison, Owner of Sharpe Mixers
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Bil MacLeslie, CEO, ipHouse
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.
Caroline Connelly, CEO, OptoTest
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!
Tom Currier, Former President & CEO, Rackmount Solutions
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing