According to an International Business Brokers Association report,
“Advisors indicated that 90% of business owners with enterprise value of less than $500,000 conducted no formal planning prior to engagement. Lower middle market business owners were more proactive, although roughly 48% also failed to make advance plans to sell. Advance planning can help sellers receive the highest market value and decrease the amount of time it takes to sell their business.”
Many business owners have a dream of selling their business some day. But many of those businesses will never be sold. You can see this simply by reviewing the number of businesses listed for sale each month on the website BizBuySell.com.
If you look at the site, you’ll see it offers listings for about 30,000 businesses at any one time. But according to BizBuySell’s recent Insight Report, there have been 1,650 to 1,890 transactions closed per quarter over the last five quarters. This means that only about 4 or 5 percent of the businesses listed on the site are being sold in any one quarter.
And that means that a lot of business owners are struggling to find a buyer who’s willing to pay anything close to asking price.
Selling a business takes both careful preparation and the ability to handle a complex transaction — with the help of an attorney, of course. Since most business owners are not experienced in selling a business, they will make mistakes along the way.
Here are 10 of the most common mistakes to avoid:
- Not learning the ropes. Like anything you do in business, there will be a learning curve when it comes to selling a business. Learn the terminology and how the selling process typically proceeds so that you can structure the deal properly and come out a winner.
- Setting a price too soon. You set yourself at an immediate disadvantage if you state a price without knowing the potential value of the business. Do not sell yourself short by setting a price too quickly. Assess the value of your business very carefully with your accountant or financial advisor and your attorney, and then set a price. Remember, you can always come down, but you generally cannot go up once you have determined your selling price.
- Selling too quickly. Unless you have to sell the business quickly for financial or personal reasons, you should not rush to a sale without exploring all of your options to determine whether or not you are getting a fair value for your business.
- Lack of confidentiality during the sales process. Once word gets out that the business is being sold employees may leave, vendors may hold back on deals, and customers may head to your competitors. The value of your business can drop quickly if you do not maintain confidentiality.
- Not increasing the value. Owners who know well in advance that they want to sell the business have time to grow the value and make the business more attractive to buyers.
- Not identifying the best buyers. You need to spend time on serious buyers only. If a potential buyer is not pre-qualified or does not appear to be prepared to make an offer, you may very likely be wasting your time. Do not spend time with the wrong buyers.
- Being unprepared to defend your valuation. If you have worked hard to create a value for your business, you should be prepared to defend and substantiate that value. Prepare backup materials to defend the value of your business.
- Failing to negotiate. How much leverage you have may depend largely on how many potential buyers are out there. Nonetheless, you need to be prepared to negotiate, and for this reason you should have professional guidance when you sell a business.
- Waiting too long to sell. Many business owners regret not selling at the most opportune time. By waiting, they subsequently encounter increased competition or have a product that has declined in value because of economic conditions. If you are thinking of selling, pay attention to changes in the economy and to the state of your industry, and look for the best selling opportunity.
- Not packaging your business properly. You should prepare documentation which will justify your asking price to the seller. Without adequate documentation, you are asking the seller to enter into the sale blindly. Below is the list of documents you should prepare ahead of time.
You have the opportunity RIGHT NOW to apply for the resources you need to grow your business and increase the offers for it when you decide to sell without paying outrageous consulting fees.
You’ve worked hard to build your business. Doesn’t it make sense to sell it for the highest price possible? Devote a few hours each week to discover the strategies to increase the value of your business, prepare for top offers, and prepare to sell it quickly. Exit your business knowing you accomplished the goals you created for the sale.
If you are one of these struggling owners, you might want to consider the following questions.
When is the best time to start preparing for the sale of your business?
What will you do to prepare your business for sell?
What is the market value of your business today?
What will you do if you are unable to sell your business?
How are you planning on selling your business?
Regardless of whether you decide to go through with a sale, the strategies in the Summit and Crest Memberships will help you build a stronger, more efficient, and more valuable business.
Use invitation code BP0916 then click here to register for the free prerecorded webinar.