3 Mistakes To Avoid when Selling your Business
- Posted By Cathie Reid
One of the biggest and most important decisions you are going to make in your business is deciding when the time is right for you to sell your business. Proper planning is critical; you will have your own reasons why you have decided to sell however it is always important that you have a strategy in place that is going to give you the best possible outcome regardless of your why. Most sellers don't expect that the exit from their business is going to be easy but many are surprised by how difficult it can be to sell their business for a good price in a reasonable timeframe, especially in the current economic environment. It is important however, to not let frustration get in the way of maximising your sale. Most of these frustrations can be easily avoided with a little upfront information about the difficulties of selling a business in today's market. Here are my top three tips to help you avoid business sale pitfalls, disappointment and lost money.
Mistake Number 1 - Not Planning
Just like getting a house ready before hanging the “For Sale” sign out the front, it is vitally important that you get your business in the best possible shape before putting it on the market.
Financial documentation, sustainable profit, lease issues, staffing problems and other concerns will not only impact the saleability of your business but also the price that your business will command.
The likely future profit levels of your business justify your selling price, having a clear profit target gives you the ability to develop a plan of action to achieve your target. By setting goals and working towards them you are more likely to have a business that can be sold for the price that you want.
A good Business Broker will work with you to guide you through the planning process. If you would like more personalised advice, we are always available for a chat, simply request a free no obligation consultation. The time to start preparing your business for sale is right now!
Mistake 2 - Not Finding the Right Person to Represent Your Business
Finding the right business broker and/or consultant to help you sell your business is crucial to your success.
Often business owners go with the first person they meet just to list their business and get the process going. This can cost you both time and money in the long run; beware of high marketing costs and a sale price that seems too good to be true.
Even though there can be certain circumstances in which a for-sale-by-owner approach makes sense, most owners will find that they are better off hiring a broker to handle important tasks like preparation, showing the business to potential buyers, marketing and negotiation.
Utilising a Business Broker skilled in negotiation and specialised in selling businesses will undoubtedly add value to the process. An experienced business broker understands the market, has access to statistics on recent sales and can apply the various methodologies to guide you on the most probable selling price
Business brokers are trained in the legislation and documentation necessary to protect the parties, guard against delays & problems and avoid the “wrecked” deal.
Likewise, don't hesitate to leverage the expertise of other professionals (e.g. accountants, lawyers, financial consultants) when you need them.
At Better Business Brokers we offer a full Service Guarantee. If you would like further information regarding our guarantee or what we can do to assist you, we would be more than happy to discuss this further.
Mistake 3 – Asking Too Much or Too Little for the Business
Setting a price without undergoing the valuation process can cause not only your sale to be slow but it can adversely affect the final sale price that you are able to achieve.
If your price is too low, potential buyers might think that there’s something wrong with the business. However, an extremely high price is obviously going to repel buyers. So, for a smooth sale, it’s a good idea to conduct a thoughtful valuation of your business before putting it in the marketplace.
Many business owners place a value on their business based on what they need to retire on or what they have invested in the business in cash or their time. None of these have any bearing on the value of your business, only the anticipated future cash flows of your business, the risk attached to these cash flows, and current market pricing will influence the price.
Having an unrealistic value will mean buyers will walk away leaving your business on the market for a long time increasing the pressure to sell and attracting bargain hunters. If you want to sell your business for a certain amount of money, work out what profits and future cash flows you will need to achieve for this selling price then put a plan of action in place to build your business to this level.
Ultimately, your business is worth what a buyer will pay. Negotiating the sale price is where brokers earn their money. If they’re involved, let them do their thing and earn their fee. If they aren’t, if it’s just you, know and understand why you are asking the price you are for your business and most importantly know how to defend it.
Better Business Brokers offers a free, no obligation consultation if you would like further information particular to your own individual needs.
Finally, throughout the sale process, remember to show you care, stay engaged, finish the job strong and get the deal done.
