70% of business acquisition deals fail. Here are some of the biggest reasons why

Selling your business is likely to be one of the biggest milestones in your career. It’s a momentous occasion but the process can be lengthy and complicated, often requiring a great deal of preparation and planning.

Yet recent figures reported by Professional Adviser have revealed that 70% of business acquisition deals fail. Of the 30% that do make it across the finish line, the majority of business owners report feeling dissatisfied with the outcome.

With this in mind, if selling your business is part of your exit strategy, read on to discover some of the common pitfalls to avoid so that you can give yourself the greatest chance of success.

1. Rushing into the sales process

If you’ve already decided that you’d like to sell your business as part of your exit strategy, you may be excited to start the process.

After successfully running your business for many years, you may feel that you already have everything in place. As such, it’s easy to rush into selling before you’re ready, and this can be a mistake.

Before you start the sales process, it’s important to consider the following questions:

Is selling your business the right step for you?
Is now the right time to sell your business?
How much do you need to sell your business for?
Is your business ready for a buyer?
Do you have the required documents to be able to sell your business?

These are just some of the questions that you should answer before you start looking for a buyer for your business. Without carefully considering each question, you could put your business up for sale at an inopportune time, jeopardising your chances of securing the outcome you need.

Moreover, it can take years to get your business to a position of being ready to sell. This is why it’s prudent to begin thinking about your exit strategy in plenty of time so that you don’t rush in and make a mistake.

2. Not consulting an expert

Selling a business is a complicated process, and there is a lot to think about.

You may have experience in some of the work required such as negotiating sales and compiling detailed financial reports. But selling your business is likely to have much higher stakes for you personally, which is why it may be helpful to enlist the help of an expert.

As a minimum, it’s sensible to consider hiring a business broker, accountant, and a solicitor to support you through the sale. In addition, a lifestyle financial planner who is experienced in working with business owners can help you to ensure that your exit strategy will enable you to achieve your goals for the future.

A professional third party such as a business broker or financial planner can take an objective view of your organisation, as well as bringing specialist knowledge about what it takes to secure a successful sale. While they will charge a fee for their services, the time they will save you in organising the sale yourself as well as the access you’ll gain to their expertise and network could be invaluable.

By neglecting to work with experts, or not heeding their advice, you risk a less satisfactory outcome from your sale. Even worse, the sale could fall through.

3. Unsatisfactory due diligence

Due diligence is one of the most important factors in selling your business, and it’s vital that you complete it to the required standard. This will usually take around two to three months to complete, and working with a professional to help you is often a sensible thing to do.

One of the reasons due diligence is so vital is because your buyer needs to have absolute clarity on everything they are investing in.

As such, you should be prepared for every detail to be scrutinised during the process. Any gaps in the data you provide can spook a buyer and potentially lead them to reduce their offer or even withdraw from the sale.

If your buyer can clearly see all of the facts to back up the claims you’ve made about your business’ proposition and its potential, they can feel confident about their purchase. Equally as important, the legal and administrative elements of the process are likely to go more smoothly when you have made the necessary information available in a timely manner.

Get in touch

Here at Chapter3 Financial Planning, we’re here to support you in creating the lifestyle you desire, both personally and professionally. We’ve helped business owners just like you to create an exit strategy that will enable them to fulfil their life goals.

Want to know more? Say hello to us at [email protected], call us on 0161 541 2826 or submit a contact form on our website.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.