The process of selling a business is, in many cases, a life changing event for the owners. Many consider the business their “baby.” As such, there is a great deal of emotion involved in the process of selling a business. It is not unusual for the owners to become very emotionally charged in attempting to … Continue reading 7 Deadly Sins of Selling a Business: 3. The Third Deadly Sin—Emotions
Most small business owners are skilled at running their business but do not have the background that is conducive to successfully negotiating a transaction involving their business. Lacking negotiating skills may result in leaving money on the table in the transaction. As this is not an optimal outcome for the business owner, it is wise … Continue reading 7 Deadly Sins of Selling a Business: 4. The Fourth Deadly Sin—Inexperienced Professionals
Lack of financial information from both the seller and the buyer of a business has the ability to quickly kill a deal. Nothing is more embarassing for the transaction advisor than to get to close the closing table only to find out that the buyer does not have the money to successfully close the deal. … Continue reading 7 Deadly Sins of Selling a Business: 5. The Fifth Deadly Sin—Insufficient Financial Information
Once the owners of a business have made the commitment to pursue a sale or merger of their company, a great deal of time must be spent on those parts of the process that lead to the closing—free flow of information, coordinating site visits with prospective buyers, due diligence, etc. Whilst the transaction advisor will work … Continue reading 7 Deadly Sins of Selling a Business: 6. The Sixth Deadly Sin—Failure to Cooperate
After prospective buyers have been pre-screened and have expressed sufficient interest in pursuing an acquisition of the company, preliminary due diligence begins. Preliminary due diligence is a basic analysis of the company, its financial position, etc. to whatever extent permitted by time and the willingness of the owners to divulge information at this stage. Typically, … Continue reading 7 Deadly Sins of Selling a Business: 7. The Seventh Deadly Sin—Failure to Disclose Problems at the Outset
Many business owners are individuals who have started or acquired a business. Most of these business owners have considered or will consider at some point an exit strategy in order to retire, achieve liquidity to pursue other business ventures, etc. Exit planning may be part of the business owner’s overall strategy of acquiring, growing the … Continue reading 7 Deadly Sins of Selling a Business
One of the most difficult considerations for an entrepreneur is the risk/return analysis of the potential business venture. An incomplete or poorly-reasoned risk/return analysis on the part of the entrepreneur may lead a savvy financial investor to turn down a potential investment in the business in favor of an apparently less risky opportunity. Even in … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: No Risk/Return Analysis
Planning for too little growth and trying to play catch up when growth exceeds expectations creates a number of challenges, such as the need to expand operations and capacity and the resulting requirement for capital expenditures and potentially, additional financial resources. However, planning for too much growth is just as bad, if not worse, in … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: Unrealistic Growth Expectations
While many startup entrepreneurs have experience in a corporate setting, few have had experience actually running an entire operation on their own. In a corporate setting, there are already established relationships, financial resources, and managerial depth across other key functional areas of the business. Usually, in a corporate setting, the functional areas are also managed … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: Lack of Startup Managerial Experience
Too often, entrepreneurs believe the business will quickly generate enough cashflow to sustain operations and, thus, enter into the new business with insufficient financial resources. They may try to operate on a shoestring budget until the business reaches cashflow break-even out of necessity due to a lack of access to additional financial resources. This may … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: Operating On Shoestring Budget/No Working Capital
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