Succession Planning: The Biggest Reasons Deals Fall Through

There is a tenfold of detrimental mistakes that can cause the failure of a possible agreement, which is a huge part of your succession planning. There are a few at higher risk to handicapping your deal. All of these threats are not rare but certain owners succumb to them easier than those who are prepared. When getting familiar with these mistakes, you will quickly note that they are self inflicted even if not on purpose. Not often is there a money issue or legality that cannot employee someone to fix. Throughout every step of the Succession Planning, be aware of these traps so that you may avoid each one. In order to have the most success in your departure these mistakes cannot be made.

Cannot Make a Decision

When you have invested your life into your company it can be a very hard decision to make when it comes to leaving the company. Questions like: When is the best time? Who am I without the business? What if I can get a higher amount later down the road? To feel confident in your succession planning these must be answered with certainty and help is absolutely encouraged.

Owners tend to dive into the selling process without any preparation. This leaves potential purchasers void of the facts needed to understand the worth of the company. Often time owners are shy to employ experts for this succession planning process. Because of this, no one will be willing to purchase or bids will be extremely low compared to their potential if the owner took a time to provide the needed facts. This tends to offend the business owner and they’ll give up on selling entirely. The desired result is not achieved, and because of this failed attempt the company might become vulnerable.

Eventually the owner will give in and try again. This time they are more prepared with a team. Unfortunately, the business has been here before and now has a poor reputation. There is a general assumption made for those looking to buy, either the owner has commitment issues or there is a reason this business hasn’t been bought. They assume that if the company was worthwhile it would had sold in the beginning. Now the owner is having to pay others to clean up his mess when it could have been avoided entirely.

Avoid causing problems for yourself. The marketplace should only be approached when you are certain and prepared to sell. Get your team together to execute your Succession Planning Process. This will all avoid you going back to the market with a bad reputation.

Performing the Agreement Alone

You are not an expert on the selling of companies so you should employ people who are. An owner is very knowledgeable in their field but that this is an entirely new ballgame. If you are tempted to do this succession planning alone, ask yourself this question: How well can you handle a team of experts in finances scrutinize your business and label an amount to it? Are you capable of having the emotional maturity, strength, and time out of your day to not only run the company but navigate an agreement that you like?

Seldom do we see an owner that can manage all these aspects and get the highest benefit. An incredible amount of factors is overwhelming for any one person to handle. Succession planning requires financial professionals, investment experts, and an applicable lawyer. Every situation is different and each business will require a unique team of advisors. The owner is still a part of this group that is actively striving to gain the desired result there is high probability of success. The goal is to gain all of your desired aspects of the deal when it is being closed.

This adds quite a few middle men that do a lot of the work for you. These experts are vital, providing you with the time and privacy needed to think about the offers presented. Keep in mind that you have nurtured this company to life. It is easy to be offended when someone is picking apart your life’s work and it might encourage you to make hasty decisions that are completely irrational and emotionally driven. This will keep you from a beneficial buyer. A purchaser will request a lot of changes and have many questions. Your team will worry about all these things for you and consult you when needed.  Because you are so attached, your team are the only ones who can be objective to the situation. They are passionate about getting you the deal you want but have no passion for your company. This is an absolute benefit when navigating a deal.

Failed to Prepare

Failing to prepare can completely cripple a deal but more often leads to a lower amount when closing. Owners that fail to evaluate will loose cash that they could of gained in the sale if they had prepared. The task is simple, employ a team that will navigate the succession planning for you.

It is assumed that you already have a financial advisor on board. This team member will give vital facts to the expert investor. The past finances of the company are known to your financial advisor and he can answer many questions needed.

A qualified Lawyer who specializes in this is essential. A family lawyer is not going to get the job done effectively. They must have a lot of practice in this area that is up to date and gained the desired outcome from those agreements. They should be able to compile a group of names that you may call to verify their succession planning. Not often are Lawyers risk takers, which is usually to their benefit, but the Lawyer who hire should have an element of daring to them.

Naturally, a lawyer is taught to keep their client from any possible risk. Their job is to be aware of problems and navigate their client around them or make sure the least amount of damage is caused. This is obviously a great benefit to having a lawyer but to make a sale happen the lawyer will have to be able to make decisions quickly. The lawyer must have the ability to assess the issues quickly and navigate them while abiding to the law. The purchaser will have it as very high priority that legal you have all your ducks in a row so that they will not be liable for anything. A lawyer that is green to this process will scoff and play games with the agreement. This is going to be flushing time and money down the toilet because the purchaser will have a lawyer that puts a halt to it. With a practiced lawyer they will apply words that ensure the buyer that you are as legal sound as best to your knowledge. This is a huge benefit if your lawyer can manager to insert it into the process. If the purchaser is stubborn it is okay that your lawyer might ask you to avoid the agreement completely in order to protect yourself.

Time is necessary to the proper lawyer if a problem does arise. A purchaser that has faith that once the precautions are performed there shouldn’t be an issue, often that means that there really isn’t one. Once the sale is completed and a problem does occur even though the owner had been assured there was protection and no problems, it is the purchasers duty to take care of the issue. It however is the owners responsibility to address any compliance issues if they are to occur whether they decide to go through with the purchase or not. It is your choice whether you take the money now knowing that you might have to lose some when addressing the problem or have to continue to run the business and eventual deal with the issue? This is a question that is best answered with the help of your lawyer who will understand the cautions that need to be taken.

Lastly you must decide whether an investment banker or business broker is needed for your succession planning. This requires you knowing what you need. An investment banker is needed when information is required about the future purchaser to make you aware of any issues or concerns they might cause. Through their research the investment banker intimately knows what the purchaser is looking for and can customize the deal to make it look very desirable to them. They will persuade potential buyers by showing them that you can give them what they want and even a little more. Confident purchasers will pay the highest amount for your business. This is the only member of your team that can perform the auction.

Where does this warlock of business sales reside and how can I find them? This is a brilliant question for your lawyer as he will be able to give you a list of options. Check out a couple of them because ultimately they will be the face of your sale. Don’t be scared to research and call owners they have helped in the past before deciding.

If you have a small business that is not worth five million then a business broker is for you. It is not worth an investment bankers time often if a company is worth less than ten million. This produces a predicament for companies in the inbetween amount. Usually you are able to employ either if you fall under that category.

The only person you don’t have to find for this process is you the owner. Trust and assurance has to be present with each of your team members. This requires a lot of work so the employment process is extremely vital. If you are concerned or worried about choosing the right advisors then give us a call and we’ll help you jump start your succession planning process.

Failing to Disclose or be Honest about Issues with Your Team

You can be honest with your team and absolutely should. Even if you are used to minimizing problems with employees or clients, this is not the place to do so. It will completely cripple your advisors. There is no issue to shameful or scary that the team cannot handle, so you must be honest with them. If you fail in this process your business might never sale.

This is not a pleasant part of succession planning but is extremely important to how well the team can do their jobs. Systems will be formed and put into place to address any issues you might have if they understand the problem at hand. Your team can patch up any problem you present them: If you are honest about the issue, they can find a solution, and apply it effectively. Do not handicap your team by keeping your secrets hidden for a purchaser to dig up. The purchaser will find out whatever it is you are hiding. This can ruin your reputation and these is little chance of selling. If you happen to still sale it will be at an extremely discounted rate. But you do not have to worry about any of this if you are honest with your team.

Failing to be Honest with the Potential Purchaser

For the same reasons that were mentioned above, it is critical that the owner is honest with their team. A well picked team are able to formulate systems to make these issues smaller which lessens their mark on the deal. However, a business owner must be bold enough to disclosing these things to potential purchasers also. It is inevitably that a purchaser will find out your dirty secrets. A quick way to ruin your reputation is to hide issues or make them less then what they are. Your team will be able to effectively sooth these problems and provide a way to present them honestly without causing real damage.

You cannot leave any stone unturned, all the facts even if they are silly, must be presented. This includes, a sheet that contains all numbers to businesses that are associated with you. It is for the purchaser to determine if these details are trivial or not. A lawyer who has failed to assist or emphasize the importance of gathering all facts should probably be reconsidered as your lawyer.

Don’t be a Hero

Succession Planning is the absolutely worst process for you to decide you are going to conquer this situation alone. You have already gone through the work of finding these people so utilize them. Bring them with you for every phone call or meeting, and never fail to ask them for advice. There might come a time where they decide you should delegate something with the purchaser. Only will this occur if your team has decided it is best and has prept you for it. A deal will quickly fail if you choose to delegate on your own. Why is this? Miscommunication will happen because you have not been fully address by the team. This slows down the whole agreement.

Losing Focus

Often times an owners focus will be glued on the selling of their company. It is the team that should be keeping you accountable for the company and they should be handling the sale for you. The owner must be stubborn in their duties as a CEO and not let the selling process distract them. By failing to maintain the business it could lose value which will negatively affect the sell process or scare of purchasers. Your team can sugar coat situations but it is best to avoid undesirable situations entirely.

It is best to pretend as if nothing else is happening and go about your duties like normal. If failing to successfully run the business the whole sales process can the derailed. Staff members must remain confident and happy.

Always ready to give the team a helping hand but focusing on the well being of the company. By successfully maintaining your business its worth will increase and so will the purchase amount. Trust your team with the sale process.

Outside Establishments

To run a company you must make outside connects with other establishments. Normally there are a consistent few that every business deals with such as:





It might be required that these people agree upon your decision to let someone buy the business.

Most common is that a landlord has to approve to let the purchaser take over the current agreement. This is rarely an issue as long as the purchaser meets the requirements of the landlord. Unfortunately, the landlord might not be as concerned about getting this done as you are. They are not as invested in this process as you. If it is a large establishment that owns your property, getting to the right person can be a challenging process. Being proactive at this stage is key so that the ball is already in motion when the time comes. Your lawyer will be great help in the succession planning process.

Whomever you have your loan through might have a say in the process as well. Especially if the purchaser is going to be taking over your debt. The purchaser will have to prove its ability to the bank. The only concern if you decide to pay it off yourself is that sometimes there are fees for such things.

Be aware of any contracts involving patrons or vendors to see if they need notified as well. This is a job your lawyer handles and will let you know when action needs to be taken. Systems will be put in place to taken any issues they might have.

Investors and shareholders will have to be notified. It is a legality that those with majority are incharge of determining what is best for those invested. In regards to a liquidation of assets it is rare that the minority has to be contacted. But stock is a different story as the majority is required to involved the minority. Purchasers do not often care to possess your stock or remain with the shareholders.

By addressing this issue early on in your succession planning you are at risk for higher success. Do not fall into the trap of not addressing the issues until closing. Sometimes legal action is taken in order to resolve concerns. Your lawyer will help you navigate the shareholders. Often times shareholders will place themselves into the process in hopes to fatten their profit. If you have already taken care of their concerns it will not become a problem late in the game.


Owners should emphasize the privacy of their succession planning. This is a very important aspect that is completely understandable.

If something leaks do not jump to a conclusion that one of your team members has betrayed you. It is hardly ever someone from your team that has talked. It is probably best to look at yourself first, as the owner. It is very hard not to talk about such a big decision to those in your inner circle who give you their promises to keep quiet. But they also have an inner circle outside of yours that they feel confident in telling. There are many people such as staff, competition, and loyal clients that upon finding out will present great concern to you. You are at risk of losing staff or quality of the work that gets done. Competition will jump at the idea of finishing you off completely. Those who were once loyal to your business will start looking elsewhere.

There is a strategic way to get the word out and your team will formulate the best way possible. Do not be haesty as often times it isn’t necessary until after the sale has already happened. This is the best time because it has an amount of certainty. Unless there is a legal reason for developing before this point, it is absolutely not encouraged.

Unable to Stay Consistent

No matter how easy the succession planning might be, it will always cause emotional wear. They move slow then fast, soar up quickly before plunging down, and sometimes break down completely. Do not be alarmed because no deal is going to go perfect. This is not something that is going to be overly enjoyable. There will be many occurrences that threaten the situation entirely.

However, a certain amount of order should always be maintained. Your advisors are there to ensure this, to address issues and stay the course. A well picked group of advisors will have no issue accomplishing this. Because they are experienced the team will see the chances for error and be able to warn you about them. It is what they do.

It is of the highest priority that the owner is stable emotionally through the process. At any time that you might start to question your state, the value you add is stripped away. It is a quick way to rain havoc on the process. Trusting the team you have formed should be all you need to keep in mind. If concerned give us a call.


More often than not, owners have a single chance at selling their company for the amount they have in mind. It is of high priority that the CEO is stable during the process and is not a threat to the sale. Finding a well experienced team is key to the success of the deal. Having an honest relationship with the team where trust is built and questions are encouraged. Continuing to run the company and keeping their focus on its success. If a CEO adheres to these suggestions, the mistakes that most make will cause no problem.

If there are concerns about employing a team of advisors, do not hesitate to reach out to us for advice during any part of your succession planning.