Avoid Selling Road Blocks
In any complex situation where money, livelihoods, egos, and timing pressures exist, lots of things can go wrong. Fortunately, the list of roadblocks in the sale of a business are predictable. Here are ten that are likely to crop up and that by preparing for them, you can avoid.
A seller who is not ready to sell. Selling your funeral home is a big decision. Make sure you have thought it through before entering the selling process. Once you start, the process will take on a life of its own.
Poor packaging of the business. You are selling a financial asset. Does it look like one? Will a potential buyer see the earnings that your funeral home generates? Make sure the income and assets are easily recognized and verifiable. Your CPA and commercial attorney can work with you to organize your accounting and legal structure to maximize the valuation of your company.
Wasting time with unqualified prospects. Many potential buyers are not mentally ready or financially prepared to buy and finance a funeral home. Learn how to quickly qualify potential buyers so that you only spend time with those who are serious. A good intermediary can help you sort the wheat from the chaff.
Letting the business slide while you are focused on the selling process. Your business must continue to generate earnings to support its valuation. Don’t lose sight of the business while you are negotiating with buyers.
Poor management of the sales process. Getting an offer, negotiating price and terms. Then the hard work starts. The due diligence process takes time and requires you to constantly walk a tightrope—between honestly providing the requested information and painting a picture of your business in the best possible light.
Too much focus on price. A big part of selling is about getting the best price. But not so big that it becomes a lopsided deal. Leave room for growth for the buyer. Sell the business at a price where the new owner can service the debt.
Manage your attorneys! Your commercial law attorney has an important role in advising and preparing the legal structure of the business purchase and sale transaction. But problems arise if the attorneys see themselves as business negotiators whose goal is to get the “best deal” for their clients. They may forget that the “best deal” is one that both the buyer and the seller can live with, a deal that will enable the business to survive and thrive after the transaction. In their enthusiasm they may not remember that deals are forged in compromise. Keep in mind, if a deal becomes too lopsided, it will like result in no deal at all.
Letting time go by. Time is a deal killer. Circumstances can change with you or the buyer, lenders can change their mind, the economy can shift. Make your preparations to sell the business. When you have a serious buyer, move quickly and bring the deal to a close.
Someone will always get cold feet at the end! It should be easy, but it’s not. After all, the hard work is done—valuations, investigations, and negotiations are complete. Now it's just a matter of getting it all written down in a form that everyone can live with. Closing is the shortest part of the process. But someone will get cold feet when it's time close. Be ready! Anticipate and be prepared with your attorney and consultant to work through the issues in a logical and reasonable way.