Recent surveys indicate that 75 percent of business owners state that they regret selling their businesses. When asked why, most indicated that they felt ill prepared for such a big decision.
In order to avoid seller’s remorse, it’s vital for business owners to do their homework beforehand. It’s easy to successfully avoid the seven most common mistakes if business owners honestly consider the following questions:
Do You Know Your Business’s True Market Value?
Buyers have their own ideas about a business’s value. Some buyers are willing to take chances, while others like to haggle. In order to be prepared to negotiate effectively, it is imperative that you know the price range that your business could realistically sell for. Being aware of the key selling points and assets that increase your businesses value and the price range that other similar businesses have sold for, will adequately prepare you for negotiating a reasonable price for your business
Are You Asking too Much for Your Business?
There are many factors that can affect the value of a business. Business owners often mistakenly believe they should base their businesses value on the precise amount they need to retire, or by how much capital they invested in the business. Unfortunately these factors have very little bearing on the actual value of a business. Businesses priced according to these guidelines generally fail to find a qualified buyer.
Have You Sought the Assistance of a Professional?
You may be an expert at running your business, but it is highly doubtful that you’re an expert at selling it. Most business owners enjoy taking a do it yourself stance on most of life’s situations, but this could be a serious mistake for business owners seeking to sell. By hiring a professional broker you can avoid the following:
- Paying excessive taxes
- Undervaluing your business
- Wasting time with unqualified buyers
- Serious legal issues
Avoiding the serious costs involved with any of these consequences is worth any additional expense incurred by hiring a professional broker.
Is it the Right Time to Sell?
Timing is critical to selling a business. Too many business owners regret not selling their companies when they should have, instead of attempting to wait until the top of their market cycle. Waiting too long to sell a company or trying to sell a company while going through personal or professional issues can be detrimental. Ideally the process to sell a business should be initiated during a period of extended growth for the company in order to ensure buyer confidence. Business owners should keep in mind that the average time it takes to sell a properly priced, profitable business is generally one year.
Are You Ready to Relinquish the Reigns?
Most buyers are wary of purchasing a business from owners who run a one-man show. They prefer to invest in companies with a successful management team that effectively delegates business management tasks throughout the group. Owners, who are in charge of the majority of operational decisions, ensure that their companies aren't viewed as risky investments by their buyers.
Have You Stopped Running the Business?
In order to maintain maximum value your business must be kept at its peak operating potential. Part and parcel to the package you intend to sell is the performance and productivity of your business. Without these, your business’ value will surely take a nosedive. Marketing your business can take a substantial amount of time from the necessary day to day operations of your business. Don’t allow the selling process to cause your businesses value to decline.
Are Your Legal and Financial Documents in Order?
Buyers will want to review records and audited financial statements going back at least two years for most business. Failure to produce these statements will negatively affect your businesses selling price. Owners should protect the value of their companies by making sure all required documentation is gathered prior to placing their business on the market.
Business owners who are fully prepared prior to selling their businesses have the best chance possible of making sure their business sells for the best possible price.