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Published in Minnesota Business Magazine, June, 2004 Case for Representation, Part I by Alan Fine Contrary to the beliefs of many business owners, selling a business is not like selling a house. Not only is it a much more complex and lengthy process, business owners usually get just one shot at selling the company they've spent a lifetime building. Inexperience with the selling process can doom a deal or result in a suboptimal sale price. Investment bankers, a.k.a. mergers and acquisitions intermediaries, on the other hand can provide essential advice and direction towards that goal. Yet many business owners try to sell their business themselves because they believe they understand their business better than anyone. I liken this to a doctor, who, understanding the particulars of his own malpractice case, thinks that he could proficiently defend himself/herself in court. The outcome for the doctor in such a situation would not be promising. The same goes for owners who decide to sell their own business without representation. Within the sales process, there are ten critical areas that business owners need to keep in mind. A good investment banker will understand the nuances of each of these situation and be able to recommend a course of action to drive the best deal for the seller. The Selling Process If a business owner wants top dollar, he or she must drive the business and leave the selling process to the experts. The sales process is long (it can take up to 12 months). During this time the business must continue to perform or valuation may be negatively impacted. The performance includes maintaining sales, gross margin and customer supplier relationships. Equally important, maintaining stability within the management ranks as they (many times) are important keys to the potential acquirer and instability there could greatly diminish valuation of the business. Lastly, avoid engaging in new costly initiatives, and pay attention to changes in operations dynamics and/or market changes. Not paying attention to these items could greatly diminish value. Page 1 |
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