There’s still enough time left in 2019 that you might be thinking this is the year to sell your business. The decision itself can be emotionally loaded. Once you make it, you’ll face a pile of other questions, including whether to go it alone or hire an advisor. Many owners make the mistake of assuming that a DIY approach saves money and prevents needless complications. But if a potential buyer approaches you, a DIY sale may mean leaving money on the table.
What is a Sell-Side Advisor?
Many owners are hesitant to hire an advisor because they simply do not know what they do. Advisors are M&A experts who specialize in preparing businesses for the sale process, then partnering with owners as they navigate the process. They help with pre-sale analysis and evaluation, marketing, negotiation, and integration.
Their primary goal is to make the company more attractive to more potential buyers, in the hopes of creating a competitive bidding environment. So the best advisors provide detailed plans outlining how they will make the company as attractive as possible. You could, of course, do all of these things yourself. However, an advisor is trained to do them well, and to do them efficiently so that you can refocus your attention on running your business.
Advisors Promote Value
Ensuring proper valuation is critical to selling a business. EBITDA, assets, and liquidity always play a role, but each industry has its own approach. If you don’t have experience evaluating value and negotiating factors such as excluded assets and working capital, you may inadvertently drive down the total value of the deal.
Advisors Optimize the Process
Inefficient sale processes lose momentum, and possibly value. Advisors know which mistakes to avoid, and can therefore streamline the process. Some common DIY mistakes include:
- Focusing only on one buyer.
- Poorly marketing the business—or not marketing it at all.
- Not helping the buyer through the due diligence process.
DIY Transactions Often Fail
If you do it yourself, you might spend less on an advisory team, but you may also leave money on the table, and accept a deal with less favorable terms than you might otherwise get. Worst of all, though, is you might make no progress at all. DIY transactions are significantly more likely to fail. This can happen when owners don’t recognize sub-optimal deal structures, don’t understand the tax implications of a deal, underestimate the challenges of due diligence, do not minimize closing risks, or fail to craft an integration plan.
Hiring an advisor frees up precious time and energy—the two most valuable assets you have to contribute to your business. When you hire an advisor, you can tend to the daily needs of your business, supporting it to grow and expand in value as you plan for the sale. Consistent earnings are a key driver of value, especially during the deal negotiation process. So don’t take your eye off the prize at a critical moment. Hire an advisor to help.