Lack of Performance Can Be a Deal Breaker When Selling Your Business
Remember, it can take many months or even a year or more to sell your company. During that time it is critical to maintain, if not improve, performance. You have to make sure the attributes that attracted the buyer today are still strong six or twelve months down the road. Here are some common mistakes that can undermine performance:
1. Getting lazy. This is not the time to start scheduling weekday noon tee times. It is even more important to stay on top of the nuts and bolts of running your company by keeping on top of accounts receivable and making sure bills are promptly paid, maintaining optimal inventory, updating systems manuals and employee handbooks, and keeping lines of communication open with your suppliers and distributors. If any of these areas falter, the potential buyer may have second thoughts about paying top dollar—or paying any dollar.
2. Losing focus. You will have plenty of leisure time after the sale is finalized so stay mentally in the game and keep your eye on the prize. Getting distracted by thinking too far ahead can cause mistakes or oversights that could negatively impact the purchase price and even jeopardize the sale. The potential buyer will be paying close attention to performance, looking for any sign of weakness or erosion.
3. Not delegating. It’s no secret entrepreneurs have healthy egos. Most have become successful by being able to juggle many aspects of their business. But the key to long-term success and productivity and performance is delegation. You need to trust others to do their jobs, which is why smart owners employ a competent sale adviser to help them in the selling process and the due diligence phase. This gives the owner more time to run the company so it retains its value and performance. It also reduces the stress that comes with trying to handle too much.
4. Overconfidence. Just because a potential buyer has sent a letter of intent doesn’t mean the sale is a slam dunk. You business must successfully pass due diligence, as well as the buyer going over every area of your financials and operations looking for a reason to lower the sale price or even back out of the deal completely. Until the deal is finalized and you collect your money, there are no guarantees.
5. Disengaging emotionally. You have to be as emotionally and managerially involved and invested as when you started the company to maintain performance. Adopting a hands-off attitude as a way to emotionally wean yourself away from your business is a mistake. Grieve after the deal is done. Until then, you need to stay engaged to make sure the business keeps performing optimally. Also, your interaction with the potential buyer can determine whether or not you get maximum sale price. The more confidence you inspire, the better. A disengaged owner does not inspire confidence and can give a buyer second thoughts.
If you’re considering exiting your business – now or in the future – learn how you can leverage our expertise to transition your business to your family or your employees – or to sell to our extensive network of strategic acquirers for the maximum payout.
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