Actoria on BFM TV

Actoria on BFM: 4 mistakes not to make for a successful business transfer

Sooner or later in the life of an entrepreneur, the question arises as to whether he or she should withdraw from the business in which he or she has invested time and money.

But as soon as he considers this disengagement, questions start to arise in the entrepreneur’s mind and he often postpones this eventuality.

So indeed the causes of failure and obstacles are numerous.

Sometimes the transfer of a company is even close to an obstacle course!

For many years, I have had the opportunity to observe that certain errors were systematically repeated.

So in order not to be negative and I will not only list these mistakes but I will directly tell you what to do to avoid them.

You will therefore save time and guilt J

Regardless of the size of your company, its activity, its location or even the urgency of your project, these tips are valid for everyone.

Mistake #1. You are not ready in your mind to transfer your business

For more than 20 years that I have been accompanying and advising entrepreneurs, I have noticed that one of the major factors of failure was not related to the operation itself and not even to the fact of not finding a buyer but was related to the entrepreneur’s decision making.

Before asking yourself “how” you are going to transfer your business, how you are going to find a good buyer, you must ask yourself the fundamental question of “why“. It is not possible to find good answers to the “how” if the “why” of the operation is not well understood.

So in particular the consequences of the transmission for the entrepreneur are often poorly addressed or not addressed at all.

The entrepreneur must have defined a real life project after leaving the company. And this project must be stabilized and irrevocable. Moreover, the financial consequences of this transfer: loss of income from the company on the one hand and financial gain on the other hand with the tax impact that this may have, must be studied in detail before embarking on the operation and not as I still see it sometimes when we start talking with a buyer.

If you don’t ask yourself these questions, how will you find the motivation to go through with the process? How will you convince a buyer, who has to invest time and money, that you will not stop the process before the end?

So my advice #1: you must be irrevocably prepared to pass on

Mistake #2. Your business is not ready to be transferred

Once the entrepreneur has made an irrevocable decision and the question of why is settled, to address the “how” question, you need to verify that your business is ready to be presented to the market!

And to know if your company is ready to be presented to the market you must check that the buyer will not discover hidden defects and that the selling price is reasonable.

Certain factors can reduce the selling price of your business or even prevent the transaction from taking place.

For example: have you concentrated all the power on yourself and not delegated any of the essential functions of your business?

Are you sure that your other partners, even the smallest ones such as the friend or the distant cousin who has not been seen for years, really agree not only on the principle of selling their shares but also on the selling price?

or is your turnover concentrated on a few customers who make for example more than 80% of your turnover or is it well spread over a diversified panel of customers?

If you answered “yes” to any of these questions, you must address them before you begin the transfer of your business.

To avoid problems with hidden defects with buyers, I advise you to identify problems that can be easily identified by any buyer and to correct them before passing on.

If you can’t fix them, don’t hide them and tell potential buyers about them and the responses you’ve started to put in place.

So my advice #2: you need to be sure that your business is as ready to be passed on as you are

Mistake #3. You concentrate your efforts on a single buyer

Human nature being what it is, an entrepreneur tends to go for the 1^ère simplest and fastest solution that presents itself to him.

In absolute terms, it would be easy to sell to the competitor who asks you to think about him or to the investment fund that has called repeatedly to meet with you.

So yes, it is easier to engage in discussions with someone you know or who has contacted you than to put in place a process and an action plan to find a buyer.

But what are you looking for? An average buyer or the right buyer for your company?

Are you naive enough to think that the competitor who already has your know-how, the same machines as you and the same suppliers, will be interested in something other than your customers and will therefore make you a high takeover offer?

Are you also naive enough to think that the investment fund, which represents investor shareholders to whom it must ensure a high level of return, is going to make you a buyout offer at a high level?

So if the providential buyer does not exist, you must set up a coherent action plan to launch a call for tenders on the market in order to identify at least 3 or 4 buyers that you will put in competition.

So my advice #3: don’t put all your eggs in one basket when choosing a buyer

 

Mistake #4. You put all your energy and time into your transmission project

Until the last second of the sale, until the signing of the deeds and the payment of the price, something can happen that prevents the transaction.

Don’t take that risk and run your business as if the deal isn’t going to happen.

Your company’s activity must continue and above all your results must continue to progress to reassure the buyer during the discussions.

You must continue to develop your sales and sign promising contracts for the future of your company.

Especially if you have only one buyer in the running, your risk is maximum and you must consider that the transaction is not done until it is signed.

At no time should a buyer think that your hands are tied in the operation.

He must feel your irrevocable commitment to do the operation but not necessarily with him.

Having a plan B or C is without a doubt one of the best pieces of advice to give in order to avoid finding yourself in the water with a buyer who withdraws at the last moment or a refused financing.

So my advice #4: Save some of your time and energy for your business

And as a bonus a 5th tip! :)

Mistake #5. You are not accompanied by experienced experts

A professional tennis player is not going to fight an opponent alone. Sure, he will be alone on the court, but at least he has his coach, trainer and agent right behind him.

Similarly, a buyer surrounds himself with financial, tax and legal advisors to buy a company

At a minimum, to complete a transaction, you need a financial advisor, an experienced business lawyer and a professional who can provide sound tax advice.

Remember: buyers are pros. If you are looking to sell to an investment fund, you need to know their investment policy to understand the consistency of acquiring your business.

And if you are considering selling to a large group, you will often be dealing with very experienced executives in your field.

Make sure you have a team of skilled experts on your side who can not only anticipate problems before they arise, but can also help you solve them when they do occur.

So my advice #5: Be accompanied by experienced experts

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