Profitable business

Top reasons why most businesses are sold LESS than their full value

Businesses are started for a variety of reasons. It is a rare entrepreneur who goes into business with the express purpose of selling it. If one did, every decision would be guided by the goal of preparing the business for sale. Other considerations and priorities such as new product development, accelerated growth, investment in employee training, increasing market share and minimizing taxes are typical business objectives. They may often not, however, be consistent with maximizing a business’ value for sale.

It is difficult to describe the complexity of the process to one who has not experienced it, because every transaction is unique. Without the help of experienced, capable and dedicated professional assistance, it can be a truly trying experience.

Most businesses are sold at less than their full value. Just to list a few of the many typical reasons:

  • Failure to maintain confidentiality.
  • Damaging value through indiscriminately overexposing the business.
  • Not providing a professional marketing package to the more sophisticated buyers.
  • Not presenting a clear value to a buyer through understandable and defensible analysis and projection.
  • Reliance on “standard formulas,” or on friends’ and associates’ estimates of value.
  • Offering the business with a stated asking price.
  • Not appreciating the buyer’s position.
  • Failure to properly recast financial statements.
  • Selling to a single “walk-in” buyer without adequately testing the market and using competition as value enhancer.
  • Selling the past and not the future.
  • Selling to a competitor without the special care this type of transaction requires.

ACT Consultant’s principals have many years of experience in helping owners avoid all these traps and missteps. We are able to maximize value with the best terms. This is possibly the most important part of the overall service we offer.

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