Renate Mueller discusses mistakes owners make prior to selling their business
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This video first ran in August 2011.
Narrator: Trying to sell or purchase a business can be a difficult, cumbersome and often complex process. In the second installment of a short series on the merger and acquisition industry, host Renate Mueller, the President of Renate M. Mueller Consultants Inc., discusses mistakes owners make prior to selling their business.
Renate Mueller: The mistakes that I find, first of all, is that they don’t plan their succession planning well enough in advance. Succession planning should take place, I think, over several years, so by the time that the plan is in place as to when they will sell, they’ve already worked towards that.
Having said that, the succession planning process does include their advisors. It does include having proper succession planning using the accountants and the lawyers and the representatives such as myself; contacting people like myself as to what is needed. How should they go about it? Maybe they are not ready today, they will be ready in two years. We can work with them on that. And that’s kind of the consulting side we can work with.
The low profitability is a problem for them because one of the mistakes they do is they may have too many expenses in there. They may not be managing the business properly; it might be poorly managed. And low profits will result ultimately in a lower selling price. So one of the things they can do by taking their succession plans out two years hence, is to build the profits, build more growth into the business, have a better bottom line, the cash flow as we put it, the EBITDA (Earnings Before Interest, Depreciation, and Amortization) and perhaps maybe attract new and additional markets that they can do business with instead of having too few markets. They may have terrible, shall we say, profitability, and that can be a problem with the insurers who may consider conflict contracts.
Another mistake might be to have a family run business, but not have it family owned. They should look at the shareholding structure; get their advisors to revisit that because that can cause problems on a sale with family run but not family owned businesses.
And then again, review what your plans are with your advisors. This is just good housekeeping.
For more information visit Renate M. Mueller Consultants Inc.
