A “deal killer” is an unresolved or undetected issue that could ruin your chances of selling a business to a third party. If you are to successfully sell any business, you need to detect and neutralise deal killers. This should be included in your pre-sale planning process. If you do so, you will help owners to achieve their exit objectives while also maximising profits. With that in mind, below we are going to take a look at three prominent deal killers that often arise, yet can be avoided.
- The owner only wants to focus on receiving big bucks for selling their business.
- The owner does not merge their demand for value with the perspective of value in the market’s eyes before they go to market.
- The owner believes that they can sell their company today for enough money to achieve financial security and satisfy their post-exit goals.
As you will see, the three deal killers that have been mentioned are of a consequence of owners having rose-tinted glasses on. This often occurs when someone is selling his or her own business. They are overly optimistic because their business means a lot to them. When an owner decides to exit a business, they often dramatically overvalue the worth of it, and this can kill a deal quicker than anything else can.
A sensible valuation
One of the biggest problems is that owners overvalue their business by huge degrees, causing them to demand sale prices that are, quite simply, unobtainable. This is a waste of money, effort and time for the owner, and it is important to make them realise this. Plus, an owner can irreversibly damage business value in the future by going to market with an asking price that is simply absurd. This is why an accurate valuation is of paramount importance when it comes to selling any business.
The benefits of an accurate valuation
There are actually two key benefits associated with guiding owners toward receiving an expert valuation of their company. You will have helped your owner to avoid two missteps if the expert disagrees with their valuation. Firstly, you will have made sure that they have not entered the market prior to the business being ready, with there not being enough money and time spent on increasing the transferable value of the business. This, in turn, can stop the owners from attaining their financial wants and needs.
Know the marketplace
It is up to you to ensure that your owners have a realistic view of the marketplace. You need to stop them from becoming overly optimistic with regards to the sale price. It is your role to make sure that deal killers are neutralised before your clients’ sale prospects are affected. Untrained and inexperienced financial advisors and exit planners can end up killing a deal themselves, so it is important that you do not fit into this category.