Selling Your Business: Avoid the Dreaded Five D’s
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’m sure he’ll thank me later), one I learned many years ago; the best time to buy a car is when you aren’t desperate for one. While not everyone can be so lucky – and he wasn’t this time – negotiating when you don’t need a car allows us to walk away if we don’t 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 “other” 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’t have to instead of when you do.
To drive home this point it’s important for sellers to know that some buyers look for one of the “Five D’s” 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 “in play”. The Five D’s are:
Making important business decisions is especially difficult when relationships among owners/managers are strained, and the long-term effects can be devastating.
The burden of debt can limit a business’s ability to keep up with the competition or, worse, threaten its very existence.
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.
An injury or illness can create a significant void in the near-term operation of the business and in succession.
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’t predict the future, and so business owners can’t 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’re coping with a separate crisis at the same time.