Selling A Business
What Can Stop a Business From Selling?
You’re used to competing in the marketplace — and positioning your business for sale is no different. You’ll want to identify what your desired customer (the business buyer) is looking for, figure out how to engage them best, and then successfully win them over to fulfill the transaction. Knowing what a prospective buyer is looking for is just as important as knowing what they’re not looking for, so you have to find out what could discourage them from going through with the sale. Find out what can stop a business from selling and how to avoid these common mistakes.
Three Mistakes That Can Prevent Your Business From Selling
Where most business owners go wrong is not making the proper preparations.
1. Poor Planning
The single largest mistake you can make during the sales process is going in blind. This is not the time to dip your toes in the water or “just see what happens.” Selling a business is a significant life decision that can significantly affect your future, so you must treat it as such.
At the very beginning, you have to decide why it is you want to sell and what you are hoping to get out of the transaction. Do you want to retire? Is it time to pursue a new business opportunity? Goals have to be determined ahead of time, or else you won’t be working towards anything important to you in the long term.
Once you’re clear on your objectives, all the prep work comes, i.e., gathering and organizing any financial statements, like tax returns, cash flow statements, and other financial documents. You’ll need clear documentation of accounts and vendor information, product details, general procedural information, employee paperwork, etc. Now is the time to get a big picture look at all your business assets and liabilities, and gathering all this information is a great way to collect this insight.
If you own a brick-and-mortar business, you should also consider “tidying” its appearance, whether that’s performing a massive clean-up or making minor but necessary repairs that could make your facility more presentable.
You have to lay the groundwork, or else you may be quite displeased with your business sale. Exit strategy planning can be a long process, but getting the results you’re looking for is worth it. The problem many sellers run into is that they don’t know what they don’t, right? This leads us to our next point.
2. Not Using a Broker
Yes, it is possible to sell your business on your own, but are you prepared to do so? Do you feel confident you have the time to market your business, target qualified buyers (confidentially), prepare all your financial documents, conduct negotiations, etc.?
The truth is that 80%+ of businesses do not sell and most of these transactions are unsuccessful because of some pretty dire mistakes in the selling process. A business broker can help you navigate these issues as they arise; plus, they take the pressure off you to constantly work towards your transaction. This is a pretty complex process, and for now, you’re still responsible for your company too. So, why not rely on the resources, skills, and time a business broker is willing to put in? Having their experience at your disposal will significantly improve your chances of a successful sale while minimizing risk and any potential liabilities.
3. Unrealistic Asking Price
It’s only natural that you’ll develop a strong attachment toward the company you spent so much time building. We often must caution owners not to let these sentiments cloud their perception of their business and its worth. By doing so, you’ll set a sale price that is so high it deters potential buyers. This is one large reason you need to hire a third party to conduct a business valuation who will give you an accurate gauge of your business’ worth. With this, you can set a reasonable selling price that stands up to the market, buyer expectations, and hopefully your own needs.
On the flip side, some small business owners form a cynical perception of their company and its performance and are ready to part with it as soon as possible. Doing this can mean you’re leaving money on the table because you’re more apt to avoid minor fixes and updates that could result in more money. Or, you may gloss over assets or selling points you hadn’t considered. In either case, it’s important to seek a professional appraiser who will provide you with an objective opinion of the value of the business.
While this is a good starting point to reference, this doesn’t scratch the surface of all you need to consider. The selling process is incredibly overwhelming, and there’s no shame in admitting you need help. In fact — it’s the smart move to do so.
If you are ready for a smooth, successful, and profitable sale, contact your local Sunbelt office to get started!