Achim Neumann is the President of A. Neumann & Associates, a premier business brokerage in Atlantic Highlands, NJ. He recently wrote a great blog about "Financial Aspects of Selling a Business." He mentions the importance of focusing on maintaining business performance during the often protracted selling process. I completely agree! During my 32-year career in business, I have seen time and time again a business's performance plunging while it is for sale or raising a round of equity funding. This has led directly to deals failing to get done and forced management team changes after a deal does get done. Why is this so common?

I believe this is totally a result of the owner/CEO taking his or her eye off the ball while these big transactions are taking place. Make no mistake about it, selling the business or raising equity financing can be an all-consuming affair! There will often be daily demands to produce information, answer questions and/or make decisions. Much of this has to happen in secrecy due to confidentiality requirements or the wish to not worry or distract the rest of the company. (Of course, the whole company now knows that SOMETHING is going on. Why else would the CEO and CFO be having so many closed door meetings all of a sudden?)

What should the owner/CEO DO about this issue? The first line of defense is to understand that this will happen. Understanding is the first step to any change!

The next step is to delegate as much as possible of the process to experienced and trusted advisors. The company CFO (if there is one at all!) should be the point person for the transaction process. If the CFO has not closed a transaction like this, then the owner/CEO should hire a part-time CFO with the required experience and skills. [Shameless plug:  in my CFO career, I've bought 18 businesses, sold three and raised many rounds of public and private equity!] The cost of hiring an expert will be FAR exceeded by the value of not having to close at a lower valuation or not closing at all.

As an example, say a business with $1,000,000 of EBITDA over the last three years is being sold at a 5X multiple. If the EBIDTA slips just 10%, to $900,000, then the buyer will insist on using the current figure. "Not fair," you say! Maybe, but Mr. Neumann states correctly that this is what WILL happen. So now you're faced with the choice of not closing or using the new valuation. The $100,000 of reduced EBITDA (10% of $1,000,000) at 5X will cause a $500,000 reduction in the price of the business! How much would you pay someone to handle the demands of the transaction to save that $500,000 by continuing to RUN the business effectively? And that's not to mention the experience that outside CFO brings to prevent any number of glitches from arising.

The third step is to actually increase the monitoring of the financial performance of the business. Insist that financial statements are still issued timely and correctly. Insist that key metrics and/or dashboards are maintained, scrutinized and acted upon. Is your CFO falling behind on this due to HIS/HER distractions from the deal? All the more reason to hire that experienced outside part-time CFO!

This is but one of a host of reasons why only 20% of businesses that are put up for sale actually end up selling. If you recognize the pitfalls and hire an experienced CFO and Exit Planner, you will have vastly increased your chances of landing in the happy 20%!

Joe has 30 years of financial and general management and transaction experience in diverse industries. He has been the full-time CFO of one mid-sized publicly-held company and four small- or mid-sized privately-held companies. Earlier in his career, Joe was the President of a "rust belt" manufacturing company, the Sales Manager and Marketing Manager of a high-tech equipment manufacturer, a financial consultant, and even a computer programmer and a naval officer.