Selling Your Business: Avoid the Dreaded Five D鈥檚
Recently my son asked for help buying a car in anticipation of a move back to Charlotte from New York City, where some parking spaces cost more than apartments here. It was a chance to share yet another life lesson with him (I鈥檓 sure he鈥檒l thank me later), one I learned many years ago; the best time to buy a car is when you aren鈥檛 desperate for one. While not everyone can be so lucky – and he wasn鈥檛 this time – negotiating when you don鈥檛 need a car allows us to walk away if we don鈥檛 get the deal we want; we can check our emotions at the door, be completely objective and negotiate from a position of strength rather than weakness.
I have been involved in over 40 business acquisitions in my career, and in most cases that was as a buyer. But since I recently joined Viking Mergers and Acquisitions I am on the 鈥渙ther鈥� side, helping business owners realize their dream by selling what is often their most valuable asset, and one they likely spent a lifetime creating. The best advice I can offer our clients is the same that I gave my son: make sure you are negotiating when you don鈥檛 have to instead of when you do.
To drive home this point it鈥檚 important for sellers to know that some buyers look for one of the 鈥淔ive D’s鈥� when hunting for acquisitions. The D’s are often the catalyst for a sale and buyers expect to have the upper hand in negotiations when one is 鈥渋n play鈥�. The Five D’s are:
1. Dysfunction
Making important business decisions is especially difficult when relationships among owners/managers are strained, and the long-term effects can be devastating.
2. Debt
The burden of debt can limit a business鈥檚 ability to keep up with the competition or, worse, threaten its very existence.
3. Divorce
A business is often a significant marital asset, and because of the subjectivity involved in valuing a business, this can become a difficult part of the proceedings.
4. Disability
An injury or illness can create a significant void in the near-term operation of the business and in succession.
5. Death
The passing of a business owner or partner can often be devastating to the company and leaves plenty of room for uncertainty in passing the business to a successor.
Obviously, nobody can鈥檛 predict the future, and so business owners can鈥檛 always anticipate when one of these unfortunate circumstances might affect them, but they can and should be informed and have a plan. That includes knowing what their business is worth today, avoiding the traps that can adversely affect the ultimate sale price, and having a relationship with someone they trust to help them through the process if and when it becomes necessary. Selling a business is an emotionally-charged process under the best of circumstances, let alone when you鈥檙e coping with a separate crisis at the same time.
To learn more visit vikingmergers.com or contact Mike at [email protected].