No one thinks that selling something you’ve spent decades building will be easy. Yet many owners are surprised to learn that the hardest part of business ownership is often selling the business. Many frustrations associated with a sales could be completely avoided with a little planning and information. Here are the 10 most common challenges that stand to impact your sale the most:
- Inadequate preparation: Selling a business is not like selling a used car. It’s not something you can do overnight by placing a “for sale” sign on the business. You must address key aspects of your business to make it an enticing option for buyers. This is why most brokers recommend beginning the preparation process at least two years before you actually list the business.
- Unwillingness to work with skilled professionals: You might be an expert on how to run your business, but unless you’ve sold hundreds of businesses, you’re not an expert on selling the business. You need people who you are. Otherwise you’ll be negotiating at a disadvantage. Work with objective third parties, including a broker or M&A advisor. Doing so can increase the final sale price by 10% or more.
- Excessive confidence: There’s nothing wrong with being assured that your business will sell at a reasonable price—unless, of course, that confidence is a substitute for hard work. Too many sellers go into the process confident that they will get top dollar. This causes them to neglect the hard work of selling, and to fail to consider the valuation criteria a prospective buyer will most likely use.
- Being too uninvolved: Many owners who hire a broker think their work is done. Don’t disengage from the selling process. Although your advisory team will work hard, no one is more motivated to sell or more knowledgeable about the business than you. Talk to your broker about how you can proactively market your business, then remain committed to the bitter end.
- Not pre-qualifying buyers: Don’t get excited about a potential buyer only to find that they can’t get financing or lack the necessary skill to take over the business. Pre-qualification documents such as financial background details and confidentiality agreements are standard. Don’t work with a buyer who won’t sign them.
- Inaccurate representations: You want to portray your business the way you see it—in the best possible light. But don’t let optimism obscure flagrant problems with your business. Don’t give only the rosy details. Don’t exaggerate or distort. Due diligence will uncover it all, and you’ll lose buyer confidence. Be honest with your broker or attorney, too, because this will empower them to advise you about managing any business shortcomings.
- Pricing issues: Inexperienced sellers often set an unreasonably high price before determining value. Price is one of the most important factors determining how long a business remains on the market. Sellers who undertake a thoughtful valuation often arrive at a more reasonable price that supports a rapid sale.
- Breaking confidentiality: If word leaks too early that you’re selling, this could negatively affect sales and undermine your relationship with your team. A good broker knows how to protect confidentiality. Listen to them and follow their prescriptions.
- Accepting only all-cash offers: It’s unrealistic in today’s sale environment to expect an all-cash offer. These sales can also prove problematic at tax time. Buyers are more likely to agree to a higher price with seller financing, or at least with assistance obtaining third-party financing.
- Not planning for the transition: Many owners become so fixated on selling the business that they fail to manage the transition process that follows closing. You and the seller must plan for transition from the beginning, and arrive at a mutually agreeable transition process.
About Creative Business Services
Since 1979, Creative Business Services has specialized in the sale of businesses and companies throughout Wisconsin. We have the experience to assist you in the difficult process of selling or buying your business or company.
Creative Business Services is a leader in the growing and dynamic business brokerage industry, providing its team of professional brokers with tried and true tools and methodologies to help buyers and sellers get businesses transferred. In addition, Creative Business Services offers its affiliate brokers the most advanced technology to manage their offerings and buyers, to generate professional reports, and to outperform the competition.