Small business owners can make significant mistakes when selling their business. Many don’t even realize that they’ve lost thousands, and have flushed their hard work down the toilet. These five tips can help you avoid disappointment, earn as much as possible, and ensure the most favorable possible deal terms.
This comes in two forms: waiting too long to sell, or rushing into a sale. Both can cause owners to miss a window of opportunity. It takes a couple of years to sell a business, so long-term planning is key to maximizing value. Maintain updated records so that you’re always prepared for the perfect buyer. Even if you have no plans to sell in the near future, a clear succession plan offers major benefits, and will ensure you’re ready should you need to sell on short notice.
Inadequate or Nonexistent Sell-Side Representation
The right broker or M&A advisor is crucial to a successful sale. Business owners often go with the first person they meet. This can cost you endless time and money. You may see no results, and have to start the process over, costing time and morale. Take time to interview a number of brokers. Ask for a realistic assessment of what is possible when you get started.
Failing to Adequately Market the Business
It doesn’t matter how great your business is, nor how visible it is in the public eye. You still have to market it. You know your business best, and are its best promoter. A broker can get you some interest, but you need to market your business, too. Draw on your connections. Capitalize on what you know about the industry. Be your business’s biggest advocate.
Getting the Price Right
Ask too much and buyers will lose interest. Worse still, they won’t take you seriously. You can expect to get top dollar for a business that generates little in the way of profits, or that it is poorly run. Compare yourself to industry competitors, and ask how you stack up.
Likewise, it’s important not to ask too little. Some owners, eager to sell and get some fast cash, think they can encourage a more rapid sale by offering a rock-bottom price. This conveys that the business is simply not worth much, and can scare off otherwise interested buyers. So work with an M&A advisor or investment banker to get an accurate valuation. It takes time and effort, but is ultimately an invaluable business marketing tool.
Choosing the Wrong Buyer
It can be hard to say no to an enticing offer. But the first offer might not be the best. Offer. Selling your business for top dollar with little money down can cause major financial loss. Likewise, taking a tempting offer without reviewing the terms may be a recipe for losing your freedom to live your life as you see fit.
It’s all about choosing the right fit, and looking beyond sale price and at deal terms. Selling to the right person is key to a successful business, and ensures that your years or decades of hard work won’t have been wasted.
About Five Talents Financial Group
There comes a time when business owners should decide how they will handle the exit of their business. Prudent entrepreneurs do not leave this critical juncture to chance, they plan for it thoroughly and well before such an event should occur. Successfully navigating the sale or transfer of your business requires a dedicated and capable team. The members of Five Talents collectively possess nearly a century of business experience combined with specific industry training and certification. The skills and know how, combined with a deep commitment to the best possible outcomes for our clientele, enable us to provide you with advisory services you can feel secure with.
Give us a call to have a confidential discussion about what may be right for you and your family.