ABC managing director Chris Small. Photo: ABC Business Sales / Supplied
ABC Business Sales says at least one in three businesses are unprepared for sale, with unrealistic price expectations just one of the issues.
ABC managing director Chris Small said investors looking to buy a high-quality business expected to see a well-organised presentation, and were turned-off by disorganised financial reports or missing documentation.
"A well-prepared business builds buyer trust and speeds up due diligence," he said, otherwise business confidence drops and the buyer walks away.
"It's something that we are constantly educating business owners in New Zealand on but the good thing is these things can be fixed," Small said, adding it would typically take six months to prepare a company for sale.
Small said another problem was with owner-run businesses that rely too heavily on the owner.
"Businesses that rely too heavily on the owner are viewed as high risk. Buyers want stable operations and clear delegation not key-person reliance."
He said owners needed to reduce their day-to-day involvement by delegating responsibilities, to ensure the business can run without them.
Price was another issue, particularly where valuations do not match price expectations.
"If the asking price is disconnected from commercial reality, serious buyers will walk away even if the business is performing well.
"At the end of the day, as we say to every business owner, the market will determine your value."
Another issue was a lack of a clear handover plan.
"A smooth transition is critical. If there's no defined handover strategy, uncertainty grows and deals become harder to complete."
Small said DIY sales processes can also be problematic.
"A successful sale needs momentum and an external advisor to drive it," he said, adding the sale process must be managed through tough negotiations in order to keep the deal on track to completion.
