Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Matt Goldston, an Entrepreneurial Advisory Services Director and one of the faces of PKF Texas’s Transaction Advisory Services Team. Matt, welcome back to The Playbook.

Matt: Thank you, Jen. I appreciate it.

Jen: So, we’ve talked a little bit about getting ready for a sale and all of the things that come along with that, but what about some pitfalls? What do companies need to look out for?

Matt: Sure. An immediate pitfall involves the unrealistic values that the founder has. Having a realistic value is very important because there is a lot of work that goes into a transaction, and if they feel like it’s falling short throughout the process, it’s difficult to transact those deals.

Jen: Perfect. What else?

Matt: I often see companies or clients that have navigated their business to providing services to one or two large customers, and so they build their business around that, and it’s difficult to transact those companies because a buyer absorbs a lot of risk that either of those customers might leave. It’s far better to take a look at your customer list and diversify, really work to bring in a large group of disparate customers that are going to help the company grow the proper way.

Jen: Now, does budgeting and forecasting come into that as well?

Matt: Absolutely. Having a budget and a mid-range plan, I like to say 3-5 years. Knowing where the company is going is important. This is important to speak to where the company is relative to the long-term plans. That normally creates value to the company when a buyer sees that the founders are looking out beyond the current conditions.

Jen: Anything else?

Matt: Absolutely. I think building a management team that is able to sustain the company. Let’s say the founder wants to backpack through Europe for a month or two, or pick up a golf, a professional golf career. That the company can still function and grow is very important, and that takes the founder giving up some of his business to share with others, allowing them the opportunity to run the business without them being there. If it’s not sustainable and it can’t be ported to the management team, it’s very difficult to close that transaction. If they close, a lot of times, it does impact deal value.

Jen: Well, great. Well, we will get you to talk a little bit more about selling your business.

Matt: Thank you very much, Jen.

Jen: Thanks. For more information about this topic, pkftexas.com/transactionadvisoryservices. This has been another Thought Leader Production brought to you by PKF Texas – The Entrepreneur’s Playbook. Tune in next week for another chapter.