In part 1 of this series, we covered the financial & valuation challenges that a business owner can face when selling or finding an investor for their business. Other aspects that business owners must consider are the operational & resource-related challenges. We outline a few common sticking points below.

  • Owner Dependence: A business that cannot run smoothly without the owner’s constant involvement is a potential liability that will require creative structuring. Investors want to purchase a “well-oiled machine” with documented processes and a strong management team. Understand how an exit plan can be a key to success.
  • Time and Effort Commitment: The sales process is a full-time job in itself, from preparing for due diligence to negotiating terms. Owners often worry about balancing these demands with the need to keep the business running and growing during the sale, as any dip in performance can negatively impact the final price. So, have a solid team in place that can run point on the deal while you continue to focus on the business.
  • Confidentiality: The risk of employees, competitors, or customers finding out about a potential sale is a major concern. Leaks can damage employee morale, lead to key staff departures, or cause a loss of business, thereby reducing the company’s value. Confidentiality is key.
  • Preparing for Due Diligence: The process of an investor’s deep dive into the company’s financial, legal, and operational records can be intensive. Owners worry about having all the necessary documentation ready and addressing potential issues that may be uncovered. Know how to prep for this and bring only the necessary employees “under the tent”.
  • Finding the Right Buyer: Not all investors are created equal. Owners worry about finding an investor who will not only pay a fair price but also be a good fit for the company’s culture, employees, and legacy. Engage in a process that not only makes parties compete to invest in the business but also deliberately seeks and considers the best match for the long-term success.
  • Legal and Regulatory Hurdles: Navigating the complex legal and regulatory requirements of an M&A transaction is intimidating. Owners worry about overlooking crucial legal details that could lead to post-sale complications or a failed transaction. These specific hurdles are best mitigated by having a great, multidisciplinary (M&A, tax, legal) deal team to ensure that your transaction is completed successfully and by the book.

“An ounce of preparation is worth a pound of cure” – being prepared and doing things right the first time can save you months of strenuous time and the headache of restarting from square one.