why buyers purchase a business
Why Do Buyers Buy?
April 6, 2017

Seller Pitfalls

pitfalls facing sellers of a business

Below are issues related to selling a business; why and when a business is sold and the exit scenarios. All have potential pitfalls and should be considered, planned for and not left to chance.

Timing
Value/Worth
Confidentiality
Key Employees
Tax Planning
Financials
Training
Non-compete
Negotiating
Ego
Disclosure
Emotional attachment
Momentum/Growth opportunities

Why Businesses Are Sold

Retirement/semi-retirement
Health issues/Death
Burn-out
Personal diversification
Divorce/partner disputes
Business growing too fast/Don’t have skill set to take it to the next level
Second generation not up to the task
Loss of market share

Exit Scenarios

1. Close the business

• Fire sale of assets
• Greatest potential for financial loss
• Reputation harmed
• Self-esteem degraded
• Does not maximize value

2. Accident, illness, or death

• Loss of competent management (whatever reason)
• Dependence on management loyalty and trust
• Relies on existing infrastructure and business processes
• Does not maximize value

3. Succession

• Successor(s) identified, qualified, selected and accepted
• Successor(s) adequately trained; relies on existing infrastructure and business processes
• Make rational choices; emotional choices do not maximize value

4. Sale of business

• Planned sale allows for owner’s goals, objectives, and timetable
• Have to identify potential buyers
• Create an attractive acquisition candidate
• Understand why they buy. Do you know what counts?
• Realize the worth: use sale for retirement planning

Knowing the pitfalls for a seller and taking time to plan your exit strategy will help avoid many of the “bad” possible outcomes for you, your business and benefactors.

Leave a Reply

Your email address will not be published. Required fields are marked *