At our firm, we’ve had the privilege of assisting numerous buyers and sellers in the past 15 years. Throughout this time, we’ve noticed certain misconceptions prevalent among business owners. These myths tend to surround the process of selling a business. As part of our commitment to educate and guide our clients through this journey, we’re taking the opportunity to address the five most common myths we encounter.
Myth 1: Immediate Readiness for Sale
One of the leading misconceptions about selling a business is the belief that a business can be sold with minimal preparation or investigation. Although we’re currently experiencing a robust real estate market where properties are swiftly sold, the process of purchasing a business is significantly more intricate. When potential buyers express interest, they’ll want to thoroughly understand your operations before making an offer.
While your company might be thriving or experiencing remarkable sales growth, this doesn’t automatically guarantee an immediate merger or acquisition. Besides the necessary investigations, other critical aspects to consider include legal matters, financial considerations, and the human element involving your employees.
Myth 2: Rapid Business Sale
Expanding on the previous myth, another misconception is that a business can be sold within a brief timeframe. While we partially acknowledge this due to the relativity of the term “short period of time,” the reality is that the entire merger and acquisition process—from the initial Investigation in Stage 1 to the Conclusion of Due Diligence in Stage 4—takes a minimum of five to six months.
Engaging with a corporate finance advisor streamlines this process and helps reduce the overall duration.
Myth 3: Waiting for a Higher Price
The value of any commodity is determined by what someone is willing to pay. Think back to the Tickle Me Elmo craze in the mid-’90s; those toys are worth far less now than their initial asking prices. Your brand undoubtedly holds value and might be worth your desired amount. However, be prepared to entertain offers lower than your initial expectations. While not always the case, statistics show that buyers typically achieve about 90% of their initial asking price after the process concludes. Can they exceed this? Certainly. But finding the right buyer is often more intricate than sellers anticipate, and waiting for a higher price doesn’t guarantee its attainment.
Myth 4: Neglecting the Details
Another prevailing myth is that you can overlook the finer details. In reality, the M&A process hinges on transparency, collaboration, and an in-depth exploration of all your business’s facets. No detail is too small, and collaborating with your corporate finance advisor to develop a comprehensive Sale Preparation Programme can alleviate potential concerns for your buyer.
Myth 5: Severing All Ties
The final myth we’re addressing is the notion that post-sale, you must completely disengage from your company. For some, this entails a formal farewell. However, others simply wish to relinquish responsibility for day-to-day operations and financial matters while remaining invested in the company’s growth.
Negotiating the Heads of Terms document can provide a solution. Your corporate finance advisor can ensure that your continued involvement is enshrined if desired.
Don’t Feel Embarrassed
Recognize that not everyone possesses comprehensive knowledge of the M&A process. For many clients, this experience is a one-time occurrence. They’ve painstakingly built their medium-sized business from the ground up and are opting to part ways for various reasons. Many aspects of selling a business remain unfamiliar, which is where our guidance comes in.
Taking the initial step towards preparing your business for sale involves completing a Transaction Readiness Report. This resource prepares you for the journey ahead and addresses the initial-stage intricacies crucial for a successful endeavour. Feel free to contact us for more information.