Reprinted from Divestopedia
The #1 Reason Business Sellers Leave Chips on the Table
Takeaway: We asked seasoned exit planning professionals how to avoid leaving wealth behind when selling a company. Their answers educated and inspired us.
I recently attended the Exit Planning Institute (EPI) annual conference. Besides the great presentations and the networking, I was fortunate enough to connect with a number of seasoned exit planning professionals.
I couldn’t help myself and had to ask them the key question I always get asked:
In your experience, what is the most common area that owners fail to address prior to their exit that results in them leaving the most chips on the table?
I got some great responses from these experts, so I thought I’d share them with you. Here they are.
Sean Hutchinson (See Sean’s profile here)
“In my opinion, the #1 mistake is allowing too little time to get ready. A well planned exit strategy is a 3-5 year disciplined process. The actual liquidity event is simply an outcome and the probability of success increases dramatically if the owner and their advisors follow the discipline. Owners (and advisors in many cases) underestimate the complexity and overestimate the readiness. This has a cascading effect and negatively impacts all the dimensions of an exit. There’s no question that rushing leaves money on the table.”
Sam Armour (see Sam’s profile here)
“One of the greatest errors I see business owners make is failing to put systems in place to make the business less dependent on the owner/founder. A business that is overly reliant on the owner can be a great risk to potential buyers, because of the fear that a new owner will not be able to maintain the relationships the current owner has with customers and vendors, and that the new owner will not be able to replicate the operations the current owner manages. Making the business owner less vital to the operations of the business is a great step towards building the value of a business in the eyes of potential suitors.”
Cliff Olin (see Cliff’s profile here)
“The failure to properly plan in general is the main culprit but, in my experience, most business owners are convinced they can do just about everything including successfully selling their business to an unrelated 3rd party. The advantages an M&A professional brings to the table are substantial and their presence allows the business owners to concentrate on running their business. In addition, owners aren’t properly identifying strategic versus financial buyers. Strategic buyers typically are willing to pay more, often substantially more, for a business that provides some synergies to their company with regard to accessing new markets, customers, or products that can be considered complimentary to their products. We do not typically pu