Most business owners have developed a lot of expertise at running their own business, but are not experienced in selling a business. Without professional assistance, they will often make costly mistakes if they attempt to handle the sale of their business on their own. Here is the second in a two-part series on the most common mistakes to avoid:
- Setting a price too soon. It can be as damaging to set your price too high, as too low. Too low and you miss the opportunity to maximize the return on your years of building a successful business. Too high and you discourage potential buyers from seriously considering your business, and risk creating the appearance that the business is “distressed” because you’re forced to make a series of reductions in the selling price. Before putting your business on the market, assess its current, fair market value very carefully, and seek the advice of professionals with proven knowledge and experience in valuing a business like yours.
- Failing to maintain confidentiality. Once word gets out that the business is being sold some employees may leave, some customers may “hedge their bet” by shifting some of their purchases to your competitors, vendors may hold back on deals and/or tighten their credit policy, and competitors may step up their efforts to steal your customers. The value of your business can drop quickly if you do not maintain confidentiality.
- Not increasing value. Owners who know well in advance that they want to sell the business have time to build up the value and make it more attractive to buyers. See my earlier article or request a copy of “Value Drivers To Maximize The Selling Price Of Your Business.”
- Wasting time with the wrong buyers. You need to spend time on serious, well-qualified buyers. If a potential buyer is not qualified, or does not appear to be prepared to make an offer, you may very likely be wasting your time, and risking confidentiality.
- 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. For the right buyer, you should also be prepared to consider carrying some of the financing.
- Not using the skills of professionals. You should seek out sound business and legal advice from professionals who have been involved with the sale of other similar businesses. Selling is a complicated process and not one that you should take on without expert assistance.
If you know of a business owner who’s thinking of selling or buying a business and who might benefit from a complimentary, confidential, consultation with us, have them contact me at firstname.lastname@example.org
By: Mike Ertel, Transworld M&A Advisors