Monday, July 12, 2010

Things to Avoid When Selling Your Business

You have run your business for a number of years and it is now time to sell. There are a lot of potholes you need to avoid when selling your business.


Asking Too Much Money with No Reasonable Rationale for the Price

Typically, the business has been the seller's life for years and the seller thinks it is a diamond in the rough. However, the price boils down to the the business valued as an investment. The business is simply a machine that makes money. The more money that it makes now, (not into the future, that is the buyer's responsibility), the more it is worth to another party.

The price of your business business is not what you owe, what you think the possible profitability will be in the distant future, or how much money you need for a comfortable retirement. The price is what the open market says it is worth today.

Not Seeing the Business Through the Eyes of the Buyer

Although it is tempting to look at one's own business in only the most favorable light, it is very important to recognize the deficiencies of the business, and address them, in order to alleviate any buyer concerns.

Insisting on an All Cash Deal

Unless you have been living under a rock, you know that banks have been very reluctant to lend to small businesses lately. In the current environment, if the business is to sell at all, the seller will probably have to finance a portion of the deal.

Giving Up Running the Business After the Business is Put Up For Sale

During the sales process, you need to run your business as if you were never going to sell it. It may take months to sell and in the meantime if you fall asleep at the wheel, your business could end up in the ditch. This inattention could result in a lower price or keep your business from selling at all.

Waiting Too Long to Sell

Too may owners wait until the last minute to decide to sell their business. Owners wait until the business is down, or they are completely burned out, or their partnership has soured completely. The time to sell is BEFORE emergencies happen - when the business is still good. The old adage is: a business owner should think about and plan the eventual sale immediately after the business is started or purchased.

Seller Not Pre-qualifying a Potential Buyer

Dealing with 'tire kickers' who have no ability to purchase your business is a complete waste of your time. It is a good idea to know the general financial position of the potential buyer before you show them your books and enter into negotiations.

Failure to Sign a Confidentiality Agreement with the Potential Buyer

You will be opening up your books to a buyer and you don't want to have them spreading confidential information about your business all over town. This breach of confidential information could cause some of the following: your customers finding out and go somewhere else; problems with your suppliers; and key employees getting nervous and taking a job with your competitor. All of these factors could lower the price you receive for your business or keep it from selling at all.