A few months ago, one of our dealmakers was contacted by a client who chose not to use us when marketing his company. He thought he would save some money and close a deal on his own after receiving our valuation of his business.
About six months later, in desperation, he called our dealmaker back and asked for help. Seems that he actually did find a buyer for his company, but since neither he nor the buyer had any experience in selling or buying a business, the transaction was close to falling apart. Fortunately, we were able to step in and save the deal and help close the transaction to the satisfaction of our client (and the buyer).
This story reminded me of the fact that if you are going to market a business on your own without the guidance of M&A advisors, that there are several key mistakes you need to avoid along the way. So here are just a few (there are many possible mistakes to make):
Of these three, the first one can be devastating. You need to realize that when you sell your company without help, it will cost you at least 1,000 hours of your own time spread over a 9 to 14-month period. Realistically you need to budget 70-100+ hours of time per month to close your deal. And since the most time-consuming piece of this process occurs during due diligence, the last 3-4 months will use up most of this time.
What we see far too often is business owners that literally stop running their businesses to focus on the sale. This can have devastating consequences because the base year, the fiscal year you are in when you are marketing your firm, is probably the most important year to business buyers.
When buyers are evaluating your company, the base year forms the starting point for the pro forma they create for their valuation models. If you have to break the bad news to them that your business is off 5%, 10%, or even 20% a couple of weeks before close, not only will this drastically impact the value they pay for your company, it may actually scuttle the entire transaction.
So watch out for being distracted from running your company while in the process of selling your business.
The second key mistake to avoid is providing the buyer with confidential information without protecting your company. Let’s face it, your competitors would like nothing more than to find out key facts regarding your business. Is this legal, moral or even ethical? No on all counts; however, that doesn’t stop it from happening. So, before you provide your offering memorandum (the 60 to 100-page document disclosing everything about your company), do two things:
Although doing both these steps will not protect you 100% from an unethical competitor, it will go a long way in keeping at bay those wishing you ill will.
Finally, the contents of your offering memorandum (and your one-page teaser that you distribute to get buyers interested) needs to be absolutely accurate while at the same time painting a picture of your company that will get lots of buyers to sign indications of interest and eventually close a deal with you.
Just as with the first point above, there is nothing worse than getting to the 11th hour with a buyer only to have to disclose something you left out or something that was in error in your documentation. Both can effectively destroy deals and once a deal falls apart, it is very, very difficult to get that buyer back on board.
Right now, buyers have substantial capital available to them. What they lack is time. To spend three months in due diligence only to lose a transaction at the last moment turns buyers off.
Make sure that what you provide is factual, accurate, clear and shows your company honestly, both strengths and weaknesses. Naïve sellers often think they can hide bad news until after a deal closes. Not only is that illegal, it rarely works because savvy buyers will send you 200-300 questions in their due diligence checklist. Trust me, the truth will come out.
These are but three of the mistakes you need to avoid if you head to market without M&A guidance. There are dozens of others, all of which can scuttle any deal. If you want to learn more about what mistakes to avoid, you should attend one of our complimentary exit planning conferences. You will gain a wealth of information about how to sell your business the RIGHT way.
To learn more, reach out to us at 972-232-1121 or use the following links:
And no matter what, be prepared to focus on the three key mistakes outlined in this article. Doing so will give you a better chance to close a deal for your business.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2018 Generational Equity, LLC. All Rights Reserved.
it all started with a conference.
start your story today,
speak directly with one of our senior advisors +1-972-232-1121
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
By submitting my name electronically and clicking the “submit” button, I understand that I am providing Generational Group, Inc., Generational Equity, LLC, Generational Capital Markets, LLC, DealForce LLC, their affiliates, representatives, contractors, etc. (“Generational Group”) my telephone number, which may include a number that is wireless and/or a number that is on a national, state, or other Do Not Call registry or list. I hereby consent and agree to receive telephone calls including any autodialed and/or pre-recorded telemarketing calls and/or text messages (telemarketing) from or on behalf of Generational Group at the telephone number provided. I further consent and agree that telephone calls may be made using automated technology such as an automatic telephone dialing system, artificial or prerecorded voice, or SMS text messaging. Consent is not a condition of purchase. I further warrant and represent that any telephone number provided is not on any state or national Do Not Call Registry and that by agreeing to these terms and conditions that if any number provided is on any such registry, I hereby consent and agree to receive telemarking calls and/or communications including any phone calls, text messages, URLs, links, emails, etc. to the telephone number(s) and/or any e-mail addresses provided. I understand that by entering my name in the electronic form provided, that I am signing my name as equally as if it was my handwritten signature and that it is my intent to provide an “electronic signature” as that term is defined in state and federal law, as well as industry practices for e-commerce.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Success, you have been added to our list.