Not running a professional sale process for your business

Blog > 4 of 5 Mistakes Owners Make Selling Their Business

Not running a professional sale process for your SME business?

Do you use random people off the street to devise your marketing strategy, negotiate your most important deals, manage your legal, tax and affairs and look after your investments?

Of course not. You manage all of that in a professional manner and you will want to manage the sale of your business in a similar manner.

We have come across people who say “I can manage my business sale myself, I am an astute business person and know my business better than anyone else”. Maybe they are largely correct but what could go wrong, here are a few things to consider.

Opportunity cost

A buyer wants to see a business that is absolutely humming, and that is your responsibility.

Even under ideal circumstances where you have a smart adviser running the sale process there is risk that you will become distracted away from your business. Part of the adviser’s role is to make sure this does not happen.
If you become diverted into running the sales process, your focus on your business will decrease.

If profit goes backwards by only 5% it may cost you 25% (5 times multiple) of
the business value.

Expertise and experience

A quality adviser has seen all the tricks before and knows how to commercially deal with them. Do you know how to identify the traps in earn outs, deferred consideration, part scrip deals, warranties, restraint of trade and the many other unpleasantries involved in a business sale?

Even if you have previously sold a business, you will still benefit from expert external advisers. The adviser knows how to challenge, extend and manage the other professionals. We recently came across a tax adviser had not highlighted that a sales price of $6.5m could actually give a substantially lower after tax proceeds than a $6m sale price.

Benefits of a third party negotiator

Hamilton Rich negotiation skill yielded a client $2.5m (40% more) during a single meeting. It is an advantage to be able to put forward “if, then” positions as an advisor, whereas coming from an owner they can instantly become concessions.

Pure economics

US statistics suggest greater than 50% of small to medium enterprises do not sell. Outsourcing the task to a professional and motivated advisor increases probability of success.

Targets

While an owner may well nominate more strategic buyers, a high calibre advisor will identify lateral strategic buyers including offshore players as well as a host of financial buyers that an owner would never locate. It is a numbers game, some numbers are better than others, but a good target list starts with 30 names.

You would probably not attempt to do DIY renovations on a $10m house, why chance a DIY approach on selling your business. Find a proven professional to help you through this important process.

For a discussion on selling your business, please call either Tony Holley on 0417313136 anytime – we at Hamilton Rich understand these conversations can be difficult to have during business hours.