No matter how you look at it, finding the right buyer for your business is not an easy process. However, if you are guided by an ethical business broker you can expect a fairly smooth selling experience.
Selling a business is all about projecting your company in a good light without being deceptive. There are a lot of pitfalls that can scare away potential prospects or devalue your business before a deal is signed. In this post, we reveal the common pitfalls that can be avoided when selling your business.
Table of Contents
Not Getting the Business Evaluated
Coming up with an arbitrary number based on your current assets and revenue is not really the way to go. Business valuation is a complex process and something that should be trusted upon an impartial business broker.
Selling When the Revenues are Down
Selling during a temporary slump period may force you to settle on a much lower amount than expected. Prospective buyers would always stress on how the business is doing in the current economic climate. Therefore, a drop in revenue will grant buyers a foothold to push the negotiation in their favor. The best way to avoid this is by seeing through a temporary revenue drop and start meeting prospects when the revenues are up.
Not Selecting a Professional Business Broker
This one’s a biggie. You need to find a business brokerage firm that is reputed in the industry for being impartial. While you do save the brokerage fee if you try and sell on your own, you can never get the flow of prospective buyers you would otherwise get by partnering up with a business broker. Go to the business broker’s website and checkout the deals they have closed in the past. That’s the only metric that really matters.
Failing to Keep it a Secret
You need to be tightlipped about your intention of selling your business. If the word gets out, employees may try to jump ship, which can severely impact the operations. This can cause you to lose your clients and sales before any deal is signed.
Not Being Selective When Evaluating Prospective Buyers
What you need to understand is that not everyone is out there to buy your business. There are people who are just out to collect essential information about your clients and business operations. Therefore, it’s important to set a filter by speaking to your business broker. Don’t worry about losing prospects. The practice of pre-qualification is well known, and it shouldn’t bother genuine buyers.
Exaggerating Sales Figures and Projections
Prospective buyers are going to study the balance sheet and sales figures. Therefore, exaggerating the sales figure in the first few meetings is not a recommended strategy. Lying about revenues can also attract lawsuits after the deal has been signed.
Allowing Yourself to Slack off Before the Deal is Finalized
This is a common mistake and one that often proves to be disastrous. Not being involved in business operations can cause your revenues to drop. It may also alert grassroot employees and managers about your intention of selling the business. Ethically, you should leave behind a healthy and functional firm. You should also remain available for some time after the deal to handhold the new business owner.
About Carson Derrow
