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5 Key Threats Business Owners Face When Selling Their Company
By Fabrice / September 4, 2024
Selling a business is one of the most significant decisions a business owner will make, and the process can be full of potential pitfalls. Whether due to poor preparation, external factors, or management errors, these challenges can seriously threaten the success of the transaction. To maximize the value of the sale, it’s crucial to anticipate and address these risks. Here are the five main threats business owners face when selling their company:
1. Undervaluation of the Company
One of the biggest risks is failing to have an accurate valuation of the business. Many entrepreneurs either overestimate or underestimate the true value of their company, which can negatively affect the selling price. Engaging with a business valuation expert is essential to ensure a fair price and to avoid selling below market value.
2. Poor Preparation of Financial Documentation
The presentation of financial documents is critical in convincing potential buyers. Poorly prepared or inaccurate financial statements can raise doubts and delay or even derail the sale. It’s vital to ensure that balance sheets, income statements, and forecasts are in order and accurately reflect the company’s financial health.
3. Neglecting Due Diligence
Due diligence is a crucial step in the sale process, where the buyer examines every aspect of the business. Mismanaging this phase can lead to complications or even the cancellation of the sale. Business owners must ensure that their company is ready for in-depth analysis by anticipating the questions buyers may ask and preparing accordingly.
4. Lack of a Post-Sale Strategy
Many business owners focus on the sale process but overlook the post-sale impact. Failing to plan for what happens after the sale can harm the transition and disrupt the continuity of the business. It’s essential to have a well-thought-out transition plan, which may include staying on to support the new owner for a period of time.
5. External Factors and Economic Conditions
Even a well-prepared business can be affected by external factors such as economic conditions, interest rates, or new regulations. These elements can influence buyer decisions and affect the valuation of your business. It’s important to anticipate economic cycles and choose the optimal time to sell.
Conclusion
Selling a business is a strategic decision fraught with potential threats if not carefully anticipated. By avoiding these common pitfalls, business owners can maximize the value of their sale and ensure a smooth transition. Partnering with M&A experts is often the key to overcoming these challenges and successfully completing the sale.
FAQ
What services does Actoria provide?
Actoria specializes in mergers and acquisitions advisory for small and mid-sized businesses. Our services include company sales, succession planning, buy-side and sell-side mandates, business valuation, financial diagnostics, investor sourcing, negotiation support and full transaction execution until closing.
Who does Actoria work with?
We support SME owners, family-business leaders, shareholders, entrepreneurs, private investors, and corporate groups seeking to acquire or divest businesses in Europe and North Africa.
In which countries does Actoria operate?
Actoria has local teams in Switzerland, France, Belgium, Luxembourg, Morocco and Tunisia, and manages cross-border deals across Europe, Africa and the Middle East through an international buyer network.
How many potential buyers are in Actoria’s network?
Our proprietary network includes more than 6,500 qualified industrial buyers, strategic acquirers and financial investors, allowing us to match sellers with high-quality counterparties.
Does Actoria support confidential business sales?
Yes. Confidentiality is fundamental to our process. All discussions, documentation and buyer approaches are handled discreetly to protect the interests of the seller and the business.
What industries does Actoria cover?
We advise companies across multiple sectors, including industrial production, manufacturing, services, IT and digital, healthcare, logistics and distribution, construction, and specialized B2B services.
What is the typical size of businesses Actoria represents?
We primarily advise SMEs with revenues generally ranging from CHF/EUR 2 million to 100 million, depending on jurisdiction and market.
How does Actoria determine the value of a business?
We perform detailed financial and strategic analysis using multiple valuation methods, including discounted cash flows, market multiples, asset-based methods, and sector benchmarking.
How long does a business sale process take?
A standard transaction typically takes 6 to 12 months depending on market conditions, buyer interest, company complexity and diligence requirements.
Why choose Actoria as an M&A advisor?
With over 20 years of experience, a senior advisory team, a structured methodology, and an extensive network of qualified buyers, Actoria delivers independent advice, tailored execution and strong transaction results for SME owners.
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Actoria has swiftly identified the inefficiencies in our company’s processes, proposed optimizations, and implemented them effectively. Furthermore, Actoria has provided outstanding support throughout all stages of our company’s transfer to a group within our industry. This includes preparing our company, identifying potential buyer partners, and negotiating up to the point of the partner’s capital entry. Actoria delivered expert negotiation skills and secured a valuable partner for us.
We were quite anxious to find a solution, as my health was deteriorating rapidly. Actoria’s consultant played a crucial role in the successful completion of my company’s sale. Their involvement was essential in executing this delicate project, as it impacted our daily operations. This project, which was close to my heart and increasingly necessary, was made possible thanks to the decisive momentum provided by Actoria.
First, Actoria conducted a thorough assessment of our company’s strengths and weaknesses, and then suggested incorporating these insights into our management approach to enhance our company’s value. Actoria led this project alongside my entire management team, enabling the involvement of all key personnel, and swiftly implementing a solution that allowed an investor to enter our capital. This was complemented by the inclusion of some of my company’s executives and a bank.
I couldn’t be happier with the result, but I am especially pleased with my decision to work with Actoria. The success of this mission was the direct result of Actoria’s hard work and sophisticated professionalism on my business. From our first meeting through the reasonable preparation process, all phases of the transfer, legal and financial operations were managed by the Actoria team. Their skills were even more evident when the complexities of this transaction were at its peak.
Hiring Actoria made the difference to achieve my original goal and move on to my next professional challenge. Selling a company like AMR in this market has not been an easy task. Actoria has demonstrated perseverance in identifying good buyers with knowledge of my industry in order to continue the development of my business, and has provided professional advice throughout the process.
The company’s sales process was a lengthy and challenging journey. The professional support from Actoria made this endeavor much more manageable. I would like to extend special thanks to the consultants from Switzerland and France for their highly effective collaboration. Your consultants proposed creative solutions during the negotiations, which effectively overcame significant obstacles in order to finalize the agreement. Their experience, knowledge, and professionalism played a crucial role in the success of this transaction.
