DEAL KILLERS

As a business owner, it’s highly likely that a significant portion of your net worth is locked up in the value of your business. This value, this cash, is trapped until you have a liquidity event (i.e. sell the business). As you approach what you think of as an appropriate retirement age, you’re likely starting to explore options for selling your company. Here are the most common ways that a potential deal to buy your company could be killed:

  1. Owner Dependence: If you ARE the business and it can’t operate without you, well then you aren’t selling it. Your business is worth much more if it doesn’t need you.
  2. Lack of Documentation: A buyer wants to see that records have been well-kept so they can be certain what they are getting themselves into. Lack of documentation is a red flag and creates too many unknowns for most buyers.
  3. Lack of Transferable Systems and Processes: If someone new can’t move into a role at your company and easily learn it (because the processes haven’t been well documented), then it is going to be too challenging for a buyer to operate it going forward.
  4. Unquantifiable Liabilities: The top three unquantifiable liabilities that kill deals are: i) product liability without adequate insurance, ii) EPA/Safety issues, iii) Outstanding lawsuits. These likely need to be cleaned up or mitigated before selling your business in order to maximize its value.

Even if you aren’t ready to sell your business, why wait in setting it up for sale? You never know when someone is going to walk through your front door with an offer that you can’t refuse. Exit planning isn’t about the future, it is about increasing value now.