I recently surveyed a dozen former business owners—many of whom were my sell-side M&A clients and some who were not. I asked them to share the advice they give to business owners who plan to sell someday and the mistakes they should avoid, and several themes emerged.

Here’s what they had to say …

1. Assess Earlier. Many sellers wished they had commissioned a comprehensive business Assessment a year or two earlier. A proactive pre-sale evaluation by a quality M&A advisor is almost certain to increase a business’s value and sale readiness, and there’s no downside.
2. Grow and Build. There was a recurring regret among sellers about not building a larger, better company before selling. Sellers acknowledged that stronger, more robust businesses command higher sale prices.
3. Financial Performance. Some sellers recognized that they became complacent and accepted subpar financial performance and left underlying issues unresolved, which negatively affected their sale outcome. Some wanted a do-over.
4. Focus on the Right Metrics. A number of sellers said they were unaware of the key performance indicators that were most important to buyers and could have driven market value upward. The Assessment mentioned above identifies these opportunities.
5. Kill More Sacred Cows. Sellers often wish they had changed outdated business practices, closed underperforming divisions, abandoned pet projects or replaced subpar employees. Eliminating “sacred cows” streamlines operations and increases a business’s value.
6. Address Concentrations. Significant customer, supplier or employee concentration risks were often overlooked by sellers, which could have been mitigated with earlier attention.
7. Strengthen the Management Team. One recurring piece of advice was to build a stronger executive team. Sellers often regretted not having a more capable team in place to attract more buyers, command better deal terms, and facilitate a smoother transition.
8. Needed an Outside Board. A few sellers thought that having external board members would have provided valuable guidance and oversight and would likely have led to better strategy decisions during their ownership.
9. CPA Firms can be Outgrown. Some sellers did not recognize when their business had outgrown their CPA firm until it was too late, resulting in excess taxes or less effective financial support leading up to and during the sale process.
10. Respect Due Diligence. Financial and operational due diligence proved to be much more thorough and data-intensive than several sellers anticipated. Properly compiling, organizing and examining relevant data ahead of time is crucial. Unresolved HR, legal and compliance matters complicate and sometimes derail a sale process.
11. Deal Team is Important. The aggressiveness of the buyer’s deal team caught several sellers off guard, highlighting the need for stronger representation and better preparation. And those few sellers who didn’t hire an M&A advisor/investment banker felt outmaneuvered by the buyer’s deal team.
12. Listen to Advice. Disregarding sound advice and market feedback led to missed opportunities and suboptimal outcomes for some sellers. Taking an unreasonable negotiating position, against the advice of their seasoned M&A advisors, caused one seller to lose an excellent deal.
13. Expand the Buyer Pool. Sellers who limited themselves to a single buyer often felt that they missed out on better offers or more suitable partners. Some sellers initially dismissed buyer prospects identified by their M&A advisor who later proved to be excellent candidates that offered favorable terms. These sellers were very happy that their advisor opened their mind.
14. Date Before You Marry. Several sellers recommended engaging with multiple buyer candidates before selecting a buyer. Asking many questions and thoroughly vetting finalists in a structured sale process helps sellers find the best fit and avoid problematic deals. A good M&A advisor organizes these interactions and helps sellers ask more of the right questions.
15. Run a Process. Sellers who did not follow a structured sale process often experienced failed deals or felt that they missed opportunities. M&A advisors play a critical role in navigating complexities, getting deals closed, and optimizing results.

Key Takeaways for Business Owners

Start Early:  Begin planning for a sale and preparing well in advance. Waiting too long can limit your options and reduce shareholder value.

Build a Strong Company:  A robust company with a strong management team is more likely to command a higher sale price. While you still have time, focus on growing and improving your business to enhance its attractiveness and value to likely buyers.

Assemble a Great Team: Surround yourself with a capable deal team, including legal, financial and M&A advisors. An experienced sell-side M&A advisor brings an investor’s perspective, helps you navigate the sale process effectively, and greatly influences the outcome of the sale.

Implement this advice and avoid the mistakes of sellers who have gone before you to better position yourself for a successful exit. Remember, you get only one chance to do this right!

—————————–

For information about Exit Strategies Group’s M&A advisory or business valuation services, please contact Al Statz at 707-781-8580 or alstatz@exitstrategiesgroup.com.

Exit Strategies Group has advised the owners of Dynamic Solutions, a California-based provider of industrial automation solutions, on their recent sale to Valin Corporation, a subsidiary of Graybar. Effective May 1, 2024, the acquisition significantly expands and adds technical capabilities to Valin’s automation and robotics group.

Established in 1998, Dynamic Solutions specializes in precision motion control, machine vision, and collaborative robotics. Their team has over 120 years of combined experience in the industry. Dynamic Solutions also provides customers with consultation, application support, and custom positioning stage design.

Valin Corporation is the leading technical solutions provider for the technology, energy, life sciences, natural resources, and transportation industries. For 50 years, Valin has offered personalized order management, on-site field support, comprehensive training, and applied expert engineering services utilizing automation, fluid management, precision measurement, process heating, and filtration products.

“We are pleased to announce the acquisition of Dynamic Solutions,” said Anne Vranicic, President of Valin. “Dynamic Solutions has a strong reputation in the industry and maintains an experienced and accomplished technical staff. We look forward to having them as part of our team.”

“I am incredibly proud of our employees who embody the top-level expertise and exemplary support for which our company is known. Together, we have earned a stellar reputation in the California tech market,” said Greg Roettger, founder and President of Dynamic Solutions. “We are very excited to join the Valin team and look forward to a high powered, synergistic alliance. The enhanced resources and backing as part of Valin will enable us to elevate our ability to provide our customers with unmatched service.”

“Exit Strategies Group’s advocacy, professional guidance and close personal attention throughout the sale process was invaluable. Seeing offers from multiple buyers helped us select the best strategic partner. We couldn’t be happier with the results,” added Roettger.

This transaction demonstrates Exit Strategies Group’s strong commitment to providing sell-side M&A advisory and business valuation services to North American industrial technology companies.  Our automation expertise covers product manufacturing, value-added distribution, custom machine building, control system integration and repair services companies. Since our founding in 2002, we have advised on well over 100 M&A transactions.

For information about Exit Strategies Group’s M&A advisory or business valuation services, please contact Al Statz at 707-781-8580 or alstatz@exitstrategiesgroup.com. Deal terms will not be disclosed.