Top 10 mistakes that ruin the sale of your business

There are several errors that ruin selling your company. A company is not sold every day, so if an entrepreneur decides to do so, it will be because he has thought it through, identified the pros and cons, and believes that he will make a profit on the sale.

For this benefit to be achieved and for the entrepreneur to be able to meet his expectations, it is very important to be well-advised and set up a successful transaction structure The fact that any kind of mistake made will have direct consequences on the course of the process.

Baker Tilly then lists the 10 mistakes that ruin the sale of your company:

10 mistakes that ruin the sale of your business

1. Negotiate with a single investor.

To avoid mistakes that can ruin the sale of your company, it is important to bear in mind that negotiating with a single investor is not the same as negotiating with several. Holding parallel conversations with several investors is of crucial importance to gain negotiating power and thus ensure that the maximum price is paid for your company.

2. Mismatch between shareholders, employees and the management body.

If you are not the only partner or shareholder in the company, it is important that the interests of the shareholders are aligned. Likewise, it is key that these interests are shared by management and employees. On a large number of occasions, misunderstandings, arguments and differences between the shareholders of a company have frustrated its sale.

3. Contact at the wrong level.

When it comes to contacting investors, it is important to contact those who have the power to make decisions. In many cases, the wrong person is contacted and investment opportunities that could be interesting for a potential buyer are lost because the right person is not contacted.

4. Improper research of potential buyers.

This mistake is often made if the investor profiles are not understood and known. It is advisable to enrich the knowledge about investors: their investment capacity, previous acquisitions, growth strategies, etc. Having staff with expertise in these processes and a good database helps to identify the investors who are most likely to acquire and who can pay the best price.

Failure to properly screen potential investors could ultimately be one of the mistakes that ruin the sale of your business.

5. Misunderstanding buyer process/models.

In any sales process, and to avoid yet another of the mistakes that ruin the sale of your company, the buyer will try to negotiate in his favour. Therefore, it is recommended that the seller is well advised to understand at all times what the buyer is proposing, to ensure that the offer he decides to accept is the best and to avoid making agreements that are not desired by the seller and that benefit the buyer.

6. Inadequate preparation of Due Diligence.

A decisive phase of the process that must be carried out with the utmost care is the phase of the Due Diligence. As a general rule, due diligence of the company to be sold is carried out by the acquiring party with the following objectives:

• Check that the information provided in the valuation process by the seller is accurate.
• Detect contingencies that have not been identified during the process, which, if they exist, have a potential negative impact on the price or on the guarantees to be provided to cover such risks.
  
  Failure to conduct due diligence could be one of the biggest mistakes that ruin the sale of your company.
  
  
  

7. Not qualifying buyers properly.

To avoid mistakes that ruin the sale of your company, once you have researched potential investors, it is key to qualify those investors to make a very targeted process to those with more possibilities. If this process is not done properly, it will lead you to contact a very large number of contacts, lengthening the deadlines and consuming a lot of time.

8. Not orchestrating all buyers properly.

One of the keys to achieving the maximum price in the process and avoiding another of the mistakes that ruin the sale of your company is knowing how to guide all investors to make a good offer so that the seller can opt for the best one. Not having negotiation and management skills with investors can ruin the process of selling a company.

9. Ego, greed, arrogance.

To avoid mistakes that ruin the sale of your company, ego, greed or arrogance must disappear from the advisor-entrepreneur communication. The fundamental key to the process is the generation of trust between the buying and selling parties. Form is as important as substance. In addition to being consistent with the information provided, we must also be consistent in our communication and personal approach.

10. Deal fatigue.

The last of the mistakes that ruin the sale of your company is the fatigue caused by such a long process. Company sale processes are not completed in 3 months. They are long, complex processes that can tire the entrepreneur. Knowing how to deal with frustration and fatigue will be the key to not giving up and getting the best offer to buy your company.

The 10 mistakes that we have analysed throughout this post are due to a lack of knowledge of the process, therefore, it is recommended that if you are thinking of selling your company you seek the help of an M&A advisor.