Business owners should stick to what they know best – running their businesses – and leave it to the professionals when trying to sell their enterprises.
"Most owners assume, incorrectly, that they are qualified to spearhead a sales effort and develop a sound selling agreement," according to Merger Advisors Network Inc., a Santa Monica service company that pairs advisers with owners interested in selling their businesses, However, Merger Advisors officials say, the best thing that an owner can do is maintain the status quo.
“To dedicate yourself full time to selling your business, or even part time, is the worst decision owners can make,” according to the company. When an owner is concentrating on selling the business, less time is spent focusing on making daily sales, which can in turn decrease profit.
Retaining a merger adviser gives the impression to would-be buyers that an owner can, and will, create options for the business. “When you get a professional involved, your deal is likely to close faster and at a higher price. You are always better off running your business rather than selling a business,” according to Merger Advisors.
Getting a valuation to determine a company’s worth is a wrong move that some owners take. Although it could be useful to the owner, overall, it provides no benefit in selling the company. Merger Advisors says most buyers won’t even look at the document, and a professional adviser promising to sell your business based on a valuation likely makes a living from doing valuations, not closing sales.
Another misstep owners make is to shell out large retainers to secure a top merger adviser. Network officials say professionals utilize many different business models; however, the best for a company owner to select is one that closely aligns the owner’s rewards and incentives with those of the adviser.
A professional adviser who works on the “success-fee model” is ideal.
“When the adviser works for success-based commissions, he usually turns down more clients than he accepts; he is focused on fewer and better clients; and he is always determined to move each deal he has forward as fast as possible, at the highest possible value,” Merger Advisor Network officials say. “This is the power of alignment.”
In the process of selling a business, the best price is not always the best price, Merger Advisors warns. A smart owner should always opt for terms over price. Adding terms to a deal affects not only the amount of money the owner might receive, but also the likelihood of the owner's ever receiving it, along with the quality of the money, its tax rate, who’s earned it, and how it might multiply or disappear. While price is important, it should not be the only consideration.
Finally, owners may misstep by waiting too long to sell their companies. When things are going well, owners often want to ride their success out to the end.
“Buyers are attracted to and pay top dollar for healthy, growing companies that provide great investment potential. Like you, they understand that a company that offers a bright future is worth more than one that is flat or declining,” Merger Advisors officials say. “When you sell a company during the good times, you are best able to create the future you want and get the price you deserve.”
For more information about Merger Advisors Network, visit the company’s Web site at www.sell-my-business.org