Mistakes to Avoid When Prepping Your Business for Sale

Mistakes to Avoid When Prepping Your Business for Sale

Every year, a lot of business goes on sale. The majority of these businesses, however, never really have a successful transaction. Many factors are responsible for this like economy, and market value affects the success of a business transaction. However, the most critical determinant of the success of the sale of a business depends on the owner.

With this in mind, it is essential for business owners to address these issues before getting to the negotiation table. This can position the business for a better deal that will favor both parties. Here is a couple of mistake business owners make and how to avoid them:

    •    No Knowledge of the Business’ Worth

Many, at times, a business owner do have a specific number or range of amount that they assume is the worth of their business. This number, in a real sense, might be higher or lower than the actual worth of the business. Buyers, however, will like to place a value on the company before offering their money.

Also, businesses worth different things to various buyers based on various distinguishing factors. With this in mind, a business owner must have value for their business based on multiple criteria. This can help come up with a reasonable selling price.  

    •    Failure to understand the Intention of Buyers

There are different types of buyers, and often, they do buy more than the seller thinks they are offering. This calls for a proper understanding of what various buyers want when trying to sell your business. Take the following different categories of buyers as examples:

  • Investors want a growth potential and future return on investment.
  • The synergistic buyer wants to get rid of the middleman and increase profit
  • A competitor might see it as an increase in market share.

This is why you need to understand the many types of buyers available. It will help you market your business well and understand the value to place on your business.

    •    Absence of the Right Advisory team Before the Business Sale Process

Failure to work with an advisory might be a money-saving endeavor for many business owners when offering their business for sale. This many times, however, is usually a grave mistake. Selling your business is a pretty complicated process, no matter the channel of sale.

This is why you need an experienced business transition team that will help you get the best value for your business. Through their input, they will ensure you have the best deal and protect your interest and assets. 

    •    Not Selling to the Right People

Business owners also wrongly assume that the best person to buy their business are friends, suppliers, or a competitor. This is not usually the case most time as someone who wants to buy the business must be genuinely interested and financially qualified.

It is also a mistake to limit oneself to the local market. Thanks to the internet, the world is a global marketplace with many potential investors offshore. As a result, try not to limit yourself to the shores of your region as there are investors with a keen interest in U.S based companies.

    •    Wrong Positioning of the Company 

Knowledge of what various potential buyers could be interested in can also help bring the business into the light. There are many intangible qualities potential buyers look for growth opportunities, reputation, business independence, etc.

Also, when prospective buyers know the kind of improvement that a new capital base can make on the business, it can improve the value. 

    •    Failure to Plan for Life When Sale is Completed

Failure to know how much you need to live comfortably when you retire after selling off a business could land you in trouble. Also, it is essential to know just how much you will have after taxes and other fees or gone.

In the same manner, a business owner needs to plan for the non-financial aspect of life after they complete the deal. This is important to prevent issues like the seller's remorse that might occur in the future.

Closing Remarks

Some mistakes can occur in the process of prepping your business for sale. The good news is that you can avoid those mistakes. Education and adequate preparation can go a long way in guiding you against such.

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