Selling a business is one of the most important decisions an owner can make. Unfortunately, even small mistakes in the process can have far-reaching consequences. In this article, we’ll look at the most common mistakes and how to avoid them. Remember, only 30% of sales turn out well.
The value of a company is different for everyone
One of the most common mistakes is unrealistic owner expectations about the value of the company. The value of the company depends on who the potential buyer is: a strategic investor sees synergies that can increase the value of the company. For such an investor, value can be created by something completely different than EBITDA. A financial investor is primarily looking for a return on investment; unlike you, he does not want to be involved in the company operationally, he does not want to have any responsibility, he is mainly interested in the relationship between price, EBITDA and the risks of acquiring and holding your company. The family buyer emphasizes continuity and emotional value. The same may apply to existing or new management.
Recommendation: Have a professional valuation of the company prepared that takes into account the different perspectives of the buyers. This will only be done by a professional firm that deals professionally with the sale of companies.
Non-separation of ownership from management
A company that is completely dependent on its founder is almost always less attractive or completely unsellable to buyers. If the owner leaves a key role, the company may lose stability and key contacts. And that’s a risk.
Recommendations: Separate ownership from management before the sale, at least three years in advance. Professional management must demonstrate its value through your company’s results. Consider hiring experienced managers to ensure management continuity. Create a management system that is independent of one person; ideally, the owner should not operationally manage the company at all.
Lack of a long-term plan before the sale
Owners often underestimate the time it takes to prepare for a sale. Lack of a sale plan can lead to overlooking key steps such as restructuring, identifying and valuing risks or preparing documentation.
Recommendation: Plan ahead for the sale, ideally several years in advance. Optimize the corporate structure, for example by splitting the business or creating a holding company. Analyse and eliminate risks. Prepare a clear sales strategy that includes timelines and priorities.
Lack of understanding of the sales process
Selling a company involves many steps that are often unknown to the owners: due diligence is performed by the buyer, but the seller must be prepared for this process. Unclarified contractual terms, such as earn-outs or debt transfers, can cause complications. Overlooking details in contracts can lead to unnecessary losses.
Recommendation: Work with legal, financial and tax experts.
How to avoid these mistakes?
- Start early: don’t wait until the last minute to prepare for the sale.
- Hire experienced advisors: lawyers, tax specialists and transaction experts.
- Optimize the company structure: consider restructuring to make the company more attractive to buyers.
- Prepare a clear strategy: Be clear about what you want to achieve with the sale – e.g. maximum price, quick sales, or maintaining the company culture.
Conclusion: selling the company as an opportunity
Selling a company is more than just signing a contract. It is a process that decides the future results of your work and investments. With careful preparation and the right professionals, you can maximize the value of your business and ensure a smooth transaction.
