Pitfalls to Avoid When Selling
* Creating bad blood:
Negotiations can be a very turbulent process, causing bad feeling and bruised
egos. An advisor is able to act as a buffer between the buyer and seller,
playing the "bad guy" or being a scapegoat, if necessary, in order
to maintain a level of decorum between the principals.
* Being caught
off-guard: By limiting the direct contact between seller and buyer,
an advisor can protect the seller from pressure to respond without proper
consideration. Additionally, an advisor can offer a compromise during negotiations
without being committed to it, to gauge the buyer's reaction. A seller negotiating
directly forgoes this advantage.
* Lacking credibility:
The involvement of a financial advisor in managing a professional sale process
sends a clear message to potential buyers that thee will be competition;
that delay, or similar tactics will be ineffective; and that pertinent information
will be carefully prepared and presented.
Up on a Roller Coaster
Selling your company can be one
of life's most stressful experiences. Beside s dealing with the prospect
of retirement, and with separation from a much-cared-for business, the owner
must also face the inevitable scrutiny that his company and his business
activities will receive from every potential buyer. The key here is to keep
your emotions in check in the face of second-guessing and criticism. For
some, that could mean almost minimal involvement in the process, at least
until the final negotiations. For others, it could mean regular communication
with those handling the sale, in order to clear up any speculation or rumors,
which are often worse than the actual facts. In any case, being overemotional
is likely to lead to rash decisions, based on the heat of the moment, rather
than on to a rational agreement process.
What another entrepreneur got
for his company three years earlier, or what one large corporation paid
for another, is irrelevant to your transaction. The market will determine
what your company is worth today. Have your advisors do their homework to
arrive at a preliminary valuation range, and then let the market do its
work. Unrealistic price expectations are the quickest way to dampen buyer
enthusiasm and ensure seller disappointment. Inflated valuations offer impede
the seller from recognizing reasonable bids.