PEM Corporate Finance sets out the three reasons why business owners / shareholders won't sell their business' - and suggest how to avoid the most common mistakes.

1. 3 reasons why
you won’t sell
your business.
(And the solutions, so that you can
avoid the most common mistakes).

2. Selling your
business?
You’re probably already thinking about how to attract buyers...
But have you taken steps to prevent them from being put off?
There are a number of pitfalls that can hinder and even prevent a
deal from happening at all.
Here are the top 3 to avoid...

3. Are you pivotal to the success of your business?
If the answer is yes, your business will struggle to attract buyers.
Acquirers need to know that the business will still run smoothly
when you’re gone, so you must start lessening its dependency on
you well in advance. Some key ways to do this are...
1. You’re too important

4. a) Build a reliable
management team
Studies show that companies
with a second tier management
team are getting offers at
almost twice the rate of those
without one.
Why is this?
Acquirers value a well-trained
internal management team as it
ensures that the company will
continue to prosper without
you.
It also reduces the cost of
replacing you with new key
staff.

5. b) Transfer your
knowledge
It’s absolutely essential
to a buyer that you don’t
leave the business with key
information “in your head”.
So you’ll need to find a
way to pass on this key
information to your staff or
the buyer.
This could be done on
paper, or you may want to
incorporate the transfer of
this information into the
training of your management
team.

6. 2. You have an
unrealistic idea
of its value
It’s not uncommon for business owners
to overvalue their company, and miss
out on a perfectly good deal as a
result.
Common reasons for overvaluing
include:

7. a) Attachment
You’ve put precious
time and effort
into growing your
company, so it can be
hard not to take this
into consideration
when valuing it.
Remember that it’s
solely the end product
and its potential that
is being valued – not
how much work you
put into it.

8. b) Denial
Weaknesses in your business can sometimes be hard to recognise or
confront. But the reality is that your buyer will notice, whether now
or down the line during due diligence.
It’s important to look at your business with a critical eye and be
honest with yourself about its limitations.

9. c) Fear
As psychologists
know, most people
fear loss more than
they desire gain.
Thus fear of
underselling may
cause a vendor to
overvalue, even at
the risk of putting
off buyers.

10. 3. You’ve
failed
to
plan
Preparing your
business for sale well in
advance can increase
your chances of
securing a rewarding
deal.
On the other hand, a
poor or non-existent
exit plan will result in
stress, unnecessary
costs, and sometimes
failure to sell at all.
Here are a few
examples of how poor
planning can hinder -
and even prevent - a
sale:

11. a) Shareholders don’t share the same view
Imagine getting a decent offer on the table – only to discover that
one of your shareholders has a blocking position and won’t accept
the deal!
An essential part of the planning process is to ensure that all
shareholders have the same view on what price they would accept.

12. b) Paperwork isn’t
in order
Are your company’s
accounts and legal affairs
up to date?
We’ve conducted a
survey of attendees at
over 50 of our Business
Exit Strategies Seminars,
and found that – despite
considering an exit – 70%
had not yet prepared their
business’ accounts for a
sale.
Rectifying this at the last
minute is costly and time
consuming, and can often
result in the buyer being
put off.

13. c) Undocumented
growth plans
While it might be
sufficient for your
own purposes to have
your plan documented
loosely, this will not
impress buyers.
If you want to sell
your business and its
prospects to a third
party, you must have
your vision for its growth
properly articulated in a
plan.

14. So – are you
able to sell?
Hopefully you now have
a better idea of how to
avoid common mistakes
that could lose you a
good buyer.

15. We like to talk.
We specialise in selling unquoted owner-managed businesses. We
help our clients maximise the price of their business and negotiate
favourable deal terms.
Get in touch if you want to learn more about how to plan for a
successful sale.
+44 (0)1223 728 222
info@pemcf.com