CEO Advisor Newsletter December 2022
Top 10 Reasons Why NOT to Sell Your Own Business
- CEOs and business owners are a motivated, driven, self-sufficient group. You have built your business by doing things your way and learning how to save money along the way. You've also developed a lot of self-confidence and feel that you can do almost anything.
- But when it comes to selling a business that you've worked so long and hard to build, it's not only prudent, but very cost-effective to hire a professional mergers and acquisitions (M&A) advisor. Invest in a professional who has the expertise and experience to get the sale done and get it done at the optimal price and terms. There is too much at stake to risk, given your decades of hard work to make it a sale by owner project. If you wouldn’t sell your own home (a very simple process involving a static property compared to selling a dynamic business) then why would you attempt to sell your business?
- Selling your business is extremely complex, requires a tremendous amount of time, preparation and follow through, organization and skill, and is one of those things that requires the experience of a business, finance, and M&A professional all in one. There are a thousand variables that come into play when selling a business and one inexperienced step could derail the sale.
- Here are 10 reasons why you shouldn't attempt to sell your business yourself:
- 10. Maintaining Confidentiality With Prospective Buyers
- Maintaining a level of confidentiality across 75 to 100 targeted buyers (including your competition) is essential when selling your business. How do you maintain confidentiality while marketing to your potential buyers? You can't. You need an intermediary between you and the buyer. An M&A professional who is not involved with the business, contacts your targeted buyers, qualifies buyers, provides select amount of information and puts you in a strong, competitive position to secure an offer and get a transaction done.
- 9. Preparation is Key
- In thirty-five years of working in M&A, I have not once seen a company properly prepared for sale in order to maximize the sale price and attract a qualified buyer. A key benefit of an M&A advisory firm is the preparation and hard work invested upfront to optimize the sale. Without the needed preparation, you will alienate buyers and diminish your value - a critical mistake.
- 8. You Will Not be Dealing with the Optimal Buyers in a Competitive Sales Process
- Because of the large task of selling your company, many business owners selling their own business are dealing with one or a couple of buyers who happen to approach them. In many cases, these buyers are savvy business owners, in the same industry, looking to buy a business on the cheap or are very experienced at buying businesses. These types of buyers typically do not make the best offer nor are they financially qualified to buy the business. An M&A advisor will seek multiple offers from a deep list of targeted buyers in order to create a competitive sale process. The M&A advisor will research this target list of strategic and Private Equity firm buyers, know some of these buyers and work diligently on a daily basis where you won’t have the time.
- 7. It Involves an Extensive Amount of Time Better Spent Running Your Business
- Selling a business takes a tremendous amount of time, organization, and a sale process that generates results. The preparation alone to launch the process and generate multiple offers takes a lot of time and expertise. Dealing with multiple potential buyers takes a tremendous amount of time. Meanwhile, you're trying to run the business and live your life. Do you really have the extra time to spend your precious hours selling your business when an expert should do it for you?
- 6. You Lack the Expertise and Experience in Selling a Business
- Selling your business is not as simple as selling a property, and selling a business requires several types of expertise. You need to prepare information and reporting, and be very knowledgeable about financial statements, including adjustments and add-backs, and how businesses are valued. You need to perform extensive outreach to secure multiple buyers and secure a signed Letter of Intent (LOI), and know how to conduct the Due Diligence process and assist in the many business and tax issues that arise in the legal process when selling a business. You need to know what you can do, what your M&A advisor should do, what your tax advisor should do and what your corporate/transaction attorney should do to keep the buyer engaged and on track to get the deal completed timely and efficiently.
- You may have a very good attorney and accountant, but they do not have the same expertise as an M&A advisor to prepare the needed information to initiate the sale process, reach out and solicit offers from a pool of many selected potential buyers, secure offers from these buyers and conduct the Due Diligence process when it comes to selling a business – all things necessary to get a transaction done.
- 5. Representing and Selling Yourself Typically Backfires
- If you don't have the time, expertise, experience, great organization and sales skills, you definitely should not be selling your own business. But, even if you are a good salesperson, there is another good reason not to sell your own business. The more you pursue a buyer, the more you are sending a message that you are anxious or desperate to sell, which will tend to make the buyer think that they can pay less for the business. Since it is an M&A advisor's job to pursue buyers, doing so doesn't send the same message.
- 4. Your Sale Process and Marketing Doesn't Stack Up to an M&A Advisor
- Sure, you can entertain a single offer from a company that contacts you, but they will know that they are the only interested party, which puts you in a very compromised and disadvantageous negotiating position. You can also advertise on a few of the Internet business-for-sale websites, but a strong, experienced M&A advisor has a very disciplined, targeted approach with many pre-existing contacts and a staff to research and pinpoint all of the top potential buyers of your business. The result is that an M&A advisor will reach far more qualified buyers resulting in a much higher probability of a completed sale, a faster sale and at a higher price with better terms.
- 3. An M&A Advisor Acts as a Buffer and an Intermediary
- Buying or selling a business is very stressful, takes nearly a thousand steps and may be the most valuable asset that you own. During the sale process, the buyer and seller are likely to get upset with each other, and things may be said that would kill the deal if they were said directly to the other party. The M&A advisor is a buffer between the parties that prevents these deal-killers by implementing an element of Good Cop (you) and Bad Cop (M&A advisor) to perform the tougher negotiations and keep you in a strong standing with the buyer and your future boss. Selling your company also seems like a marathon where fatigue sets in for someone not used to the rigors of transactions. Having a professional M&A advisor becomes more valuable by the day as the sale process progresses.
- 2. The Sale Process is Much More Than a Couple of Meetings and Accepting an Offer
- Accepting an offer to sell your business is only one aspect of the sale process and closing the sale. The sale process includes a strategy and plan, researching and documenting the potential buyers, creating and housing all of the preparation materials that will attract and secure a strong offer, negotiating and finalizing the offer, a complete Due Diligence process, overcoming any tax issues, typically negotiating a lease with the landlord, and working through all of the purchase agreement and employment agreement issues. This requires a team approach of very seasoned experts to accomplish the many, many steps of selling a business.
- 1. You Need a Trusted M&A Advisor
- Your attorney and accountant may be very skilled and knowledgeable, but most don't commit the needed time, don't focus on a goal of reaching out to 100 +/- prospective buyers and securing multiple offers, don’t perform a detailed Due Diligence process, and don't have the knowledge about the marketplace and selling businesses that is needed to be successful.
- Attorneys and accountants react to an offer that is secured. A hands-on M&A advisor will advise you throughout the process and help you avoid making a major mistake that will cost you a ton of money or that will jeopardize the sale altogether. Also, a buyer is more willing to accept what an M&A advisor recommends since the prospective buyer will have developed a relationship with the M&A advisor from the first phone call initiated to the buyer, rather than what your attorney or accountant desire, who are typically pressing on a legal or tax issue.
- One Last Point - Selling Your Business Faster For the Best Price
- This reason alone should be enough to move any seller to using an M&A advisor. Selling a business is both tedious and stressful, and the only reason to undertake such an endeavor on your own would be to save money. But when it comes to selling a business, do-it-yourselfers typically get a much lower price for their business, and most don't get a transaction done at all. Why is that? An M&A advisor will reach a greater number of prospective buyers who know they must compete on price. Because they widen the field, an M&A advisor more than makes up for their fees with a proven sale process, higher sales price and better terms, providing the seller with a higher take-home figure, all the while enabling the CEO or business owners to focus on the business during the process. A strong M&A advisor will generate an offer price and favorable terms that MORE than pay for its fees.
- Some sellers attempt to sell their own business, only to find the sale process is much more complicated and time consuming than they anticipated. Business deals are complex transactions that require expertise well beyond what the typical CEO or business owner has.
- An M&A advisor is an expert and your trusted business advisor, your marketing team, and your expert negotiator all wrapped up in one. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by mobile phone at (714) 697-3370, by email at MHartsell@CEOAdvisor.com, or visit us at www.CEOAdvisor.com for more information.
CEO Advisor, Inc. Forges an Alliance with Octane Capital & Growth as a Preferred Advisor
- CEO Advisor, Inc., a growth and strategy, growth capital and M&A advisory firm, has forged an alliance with Octane Enterprise Solutions, LLC dba Octane Capital & Growth as a Preferred Advisor to accelerate the growth of companies in the Octane ecosystem.
- Since 2004, CEO Advisor, Inc. has provided hands-on business advisory services for accelerated growth, as well as, growth capital and mergers and acquisitions advisory services to CEOs, presidents and business owners of small and mid-size companies.
- CEO Advisor, Inc. previously played a role as an Octane LaunchPad SBDC Panelist. This new alliance expands the relationship for CEO Advisor, Inc. to advise the CEOs of a greater number of startups, early stage, later stage and growth companies that are involved with Octane.
- Bill Carpou, CEO of Octane states, “Octane’s Preferred Advisors are a valuable part of the Octane ecosystem and our mission to develop life sciences and technology companies in Southern California. CEO Advisor, Inc. is an important part of advising CEOs and their growing businesses to achieve the next level of growth and secure the needed growth capital.”
- CEO Advisor, Inc. has advised companies affiliated with Octane such as Azarc.io, Inc., Credder, Inc. and Quidient, LLC. For over 18 years, CEO Advisor, Inc. has successfully advised CEOs and management teams on strategy, accelerated growth, funding, marketing, finance, operations and M&A needs to provide the expertise and seasoned management support to succeed.
- Mark Hartsell, President of CEO Advisor, Inc., states, “For twenty years, Octane has provided a highly valued network of expertise, direction and advisors, and facilitated the connections and path to growth for many promising growth companies. We are excited to elevate our involvement and impact on this mission together.”
- About CEO Advisor, Inc.
- CEO Advisor, Inc. provides growth consulting, growth capital and mergers and acquisition advisory services to effectively meet the goals of small to mid-size companies in the software, technology, media, healthcare, professional services and other industries, as well as, Private Equity firms to accelerate the growth of their portfolio companies. CEO Advisor's mission is to advise CEOs, presidents, business owners and principal executives with the needed experience, expertise and focus, coupled with hands-on advice to grow your business to the next level and realize your life’s dream through a successful exit.
- Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial business consultation at (949) 629-2520, by mobile phone at (714) 697-3370, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.