Selling a business is often the culmination of years, if not a lifetime’s work, but poor decision making during the sale process could leave you worse off or worse still, you could lose it all.
Here are 5 simple tips to help you avoid short changing yourself when it comes to selling your business:
1.) The most successful sales happen when they are planned.
Before advertising your business, it’s wise to start refining the aspects of your business that are likely to get buyers excited, and correct the ones that will turn buyers off. Long term planning is essential if you hope to realise the best return, as some short comings in your business may take months if not years to correct. Take a look at our previous posts to see what gets buyers excited and what turns them off.
2.) Know what it is worth.
This one sounds obvious but you’d be surprised at how many people pick a figure that’s relative to what they bought it for or what they think it’s worth. Business valuation can be tricky, so don’t rely on your own judgement alone when it comes to putting a value on your business.
On the one end of the spectrum you could end up undervaluing your business by thousands of pounds, leaving you out of pocket. On the other end of the scale you could end up chasing buyers away with an unrealistic price.
Always get a second valuation done, business transfer agents will usually conduct a valuation for free with the aim of signing you up as a client. If there’s a big difference between valuation amounts then try to find out why.
There have been instances in the past where some agent’s have overvalued a business to secure a mandate and then locked the seller in with a strict contract which requires an upfront payment or monthly fee. Avoid this at all costs because the agent’s incentive disappears when they know they get paid regardless of whether they make a sale or not.
3.) Find the right representatives.
If you do decide to use a business transfer agent, try to avoid agents who are not based in your area. It’s unlikely they will have a handle on the finer details that may influence your businesses value and conducting viewing when based miles away does not sound like a recipe for success.
Avoid unrealistic monthly fees and contracts that tie you in for months. I’m not saying these agents don’t deliver results, I’m just saying that commission only agents have more incentive to find you a buyer.
One great way to identify whether your chosen agent is as good as they say they are is to use Google. Type the agents name plus the word “Review” or “Complaints” or something similar and see what other are saying about the agent.
4.) Say it like it is.
One big mistake to make is to provide inaccurate facts and figures to the potential buyer. Many sellers are emotionally attached to their businesses and figures are sometimes embellished to paint a better picture of the business. Often this is not out dishonestly, but rather subjective perspective.
If you are found to be inaccurate on any of your facts and figures, you could undermine the buyers confidence in your ability to provide accurate information and the whole deal could fall apart. Even if you do manage to retain the buyer’s interest, it’s unlikely that you’ll be in any position to negotiate when the buyer starts asking you to reduce your price because of misleading facts and figures. Say it like it is.
5.) Choose the right buyer.
I know, the temptation of taking the first or the highest offer is almost impossible to resist but despite first impressions this offer may not be the best one for you. Higher offers often have strings attached and in some cases buyers are looking to you for some form of seller finance or guarantees. Beware! You don’t know the buyer from a bar of soap. He could be a bad leader or difficult to get on with. If that is the case your customers will waive you goodbye and your talented staff will have made a dash for the exit long before you have chance to pick up the pieces.
When it comes to accepting an offer, don’t forget that businesses can take as much as 2 years to sell. Remember, being patient when selling a business is a very profitable virtue