These are a few of the points Hal and I discussed during our conversation. Reach out to us to help you scale your business before exiting;

Chuck Crumpton
864.915.0066
Strategic Advisory Forum, LLC

Major Pitfalls Before Selling

• Owner dependency: Many businesses are built around the owner rather than being sustainable operations
• Lack of preparation: Business owners often too busy working “in” the business to prepare for exit
• Valuation misconceptions: Not understanding true company value vs. owner value
• Poor record keeping: Inadequate documentation and financial systems

Critical Process Elements Early Steps:

• Non-disclosure agreements are essential before sharing sensitive information
• Letter of Intent (LOI) should be carefully drafted with legal input
• Team approach is crucial – attorney, CPA, advisor, and potentially broker

Price vs. Terms:

• Terms matter more than price in the long run
• Beware of “your price, my terms” scenarios
• Seller financing arrangements can become problematic
• Payment structure significantly impacts actual value received

Due Diligence Process Financial Documentation Required:

• 3-5 years of tax returns and financial statements
• Current P&L and balance sheet
• Cash flow analysis and working capital needs
• Account receivables/payables aging

Additional Documentation:

• Loan agreements and banking relationships
• Real estate leases and property documents
• Employee agreements and HR issues
• Litigation history and pending legal matters
• Environmental assessments (if applicable)

Key Advice for Business Owners

1. Prepare early – Begin with the end in mind, even if selling is years away
2. Build a sustainable business that doesn’t depend entirely on the owner
3. Maintain clean records and organized documentation
4. Engage legal counsel early in the process
5. Don’t count on the deal until it closes – have a Plan B
6. Focus on living your life during the process rather than waiting for the outcome

Post-Exit Considerations

• Many successful entrepreneurs struggle with retirement/inactivity
• Having a plan for “what’s next” is crucial
• Avoid making hasty reinvestment decisions due to urgency to get back in the game

Bottom Line: “Time kills deals” – being prepared and organized significantly increases the probability of a successful transaction. Selling a business requires a village of professionals and that business owners shouldn’t attempt to navigate the complex legal and financial aspects alone.