Over the past 21 years of advising sellers of middle market aerospace and defense companies, we have seen sellers repeatedly make 3 big mistakes when selling. They are as follows:
1. Trying to Time the Market
Just like the stock market, it has been proven over and over that trying to time the market is a fool’s errand. The way to make money in the stock market is to regularly invest over time and have a long-term horizon. The exact same is true regarding selling a middle market company in the aerospace and defense industry: methodically build your business over time and when you are ready to retire or otherwise sell your business, ignore market timing and enjoy the fruits of your labor when the time is right for you.
2. Lack of Preparation
Like everything else in business: plan, prepare and execute. Whether it relates to expanding into a new product line, or new line of business, or building a new facility… plan, prepare and execute. But for some reason, too many owners don’t prepare to sell. It takes years to build a new facility… why do some buyers think they can sell their companies with literally no preparation?
3. Being Penny Wise and Pound Foolish
Time and time again we have seen buyers trying to save nominal dollars related to the sale of their business and losing literally millions in the end. It makes no sense, but we see it all too frequently. Whether it is having financial statements reviewed instead of audited, failing to do a Phase I environmental audit in advance, failing to engage legal counsel to conduct a pre-sale compliance review, or not making minor cosmetic repairs to facilities, we continually see sellers being penny wise and pound foolish. Just like selling a house, if the bathrooms are old and dingy, business sellers should make repairs before selling; you will get back much more than you spend.
The above are the top 3 mistakes we have seen over the years. We have many more lessons-learned that we will share with you over the months ahead in future Deal Notes®.
Have a great day everyone.
Managing Director, Defense