InSight

Exit and Growth Strategies for Middle Market Businesses

Preparing To Sell

By John Hammett | Apr 30, 2012

Today’s Wall Street Journal has a good article about being prepared to sell your private company.  It highlights a couple of issues that we frequently encounter with prospective clients for our services.

1.    Not separating yourself from the business.  In order for owners to sell and retire, there must be a management team that can run the company after you’re gone.  This is the #1 shortcoming we see most often.  It’s is never too early to begin hiring and training the team that will take over for you.  Otherwise the company owns you, not the other way around.

2.    Incorrectly valuing the business.  Your company isn’t worth exactly how much you need to retire, it isn’t worth the same as your cousin sold his company for in 2007, and it’s not worthy it’s “book value”.  If you ask too little, you’ll leave money on the table, if you ask too much, you’ll never complete the sale.  Ask an investment banker to give you an idea of what is a realistic value for you company before you start, and use an investment banker to manage a process designed to wring the best price from a competitive process.

3.    Falling for the “too good to pass up offer”.  We often have owners become clients after a failed exercise with a buyer that made a very attractive offer, only to try to “haircut” the seller right before closing.  Make sure you are talking to qualified, serious buyers and you understand that the price is fair and the buyer has the resources to close the deal.  The highest price is no price if the deal can’t get done.

To read the Wall Street Journal article, click here.

Posted by John Hammett.


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