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- 7 common myths about selling your business - February 6, 2020
- Why you should focus on existing customers rather than new ones - February 6, 2020
If you are considering selling your business, then please be sure you don’t get caught out by one of the following myths. You may only ever sell one business and the area of business sales may be one that you and/or people you speak to are not fully versed in.
It is useful to remind yourself that the skills you possess as a business owner, and hopefully a successful one, may not prepare you fully for the sale process and the realities of the business-for-sale marketplace.
Here are seven common myths that need to be dispelled as you approach your exit from the business:
My business will sell in a few weeks
Yes, some businesses sell quickly, but the reality is that in the marketplace there are far more businesses for sale than there are potential purchasers.
It’s more likely that it will take months to locate the right buyer for your business. The generally accepted rule of thumb is that it takes 6 to 10 months to sell a small business.
This may seem like a long time, but the simple truth is that it takes time to find the right buyer, who will make you an offer that is acceptable and someone you are happy to take the reins from you.
I’ll get the asking price for my business
Like with many of the transactions you will have been involved with in business you will need to expect there to be some level of negotiation. The asking price you set is unlikely to be what you may finally receive as a sale price.
According to the BizBuySell.com data, sellers are receiving, on average, about 90 percent of the asking price for their companies, and it’s not unusual for that spread to be even greater.
If the buyer needs finance, then that is up to them to sort out
The reality is that most buyers will need to use some form of finance to purchase your business. Even for experienced business owners and purchasers they will look to leverage the use of funding from elsewhere as this makes the process of purchasing more efficient for them.
Remember, that it is in your interests to help them through this process as this may be the difference between them completing the purchase or not.
Selling a business is very different to selling a house, for example. The purchasing process will need to be more transparent, there are more creative ways for a business to be bought and sold and the purchaser will likely require various financial information from you to substantiate and finance application they have made. You will need to assist them in every way through this process.
Often you may need to finance part of the sale price yourself and/or have some of the proceeds paid to you over time. Be open to consider these options as this will certainly give you more chance of a successful sale.
It is also worth noting that you may need to be involved in the business for a period after the sale, see point 7 below.
I’ll get a better price if I wait until next year/for the economy to improve/interest rates to go up/down
A well-timed sale of your business may be beneficial but don’t get caught up in trying to predict when might be a better time. Whilst we should examine some general economic and seasonal factors, we are unlikely to ever predict ‘the best time to sell’ with any level of success.
In opposition to this myth is the fact that you just don’t know when the ‘right’ buyer is going to come along, this could be as likely to happen today as next year.
Your time would be better spent building in strength in your business that shows any potential purchaser how your business is still able to meet targets irrespective of other ‘external’ factors.
My business is different from others
We are certain that your business is likely different in some way from your competitor. However any purchaser is going to be shrewd and will need to categorise or standardise your business against others in the market to enable them to understand it better and examine how they would run it.
Don’t be offended by this or think ‘they don’t understand my business’. If you are waiting for another clone version of you to come along to buy your business then you may be waiting some time!
It is good to understand the plans of any buyer but remember those plans may be different to yours, which is OK.
Unfortunately, as part of the due diligence process the buyer will be looking for any areas of actual or perceived weakness in your business so they can manage any potential downside and understand exactly what they are buying.
Again, don’t be alarmed or offended by this. Try to work with your buyer to give them the information they need, rather than banging your drum of how ‘unique’ or ‘different’ your business is.
My business is ready to sell
There may be quite some time and energy required to enable the sale of your business.
We have met many business owners who appeared to have just decided one day that they wish to sell.
This in itself is not a problem but just may mean the sale process becomes a long and exhausting one.
We have helped many businesses in this area, as we have been involved in the purchase and sale of many businesses.
We have a proven approach to gathering the required information for a sale. If you would like to talk to us about this then please get in touch with us here:
Otherwise please don’t underestimate the fact that successful business owners often spend months or even years positioning their companies, compiling financial records, and performing other tasks that may directly affect the sale.
I can sell my business and walk away the next day
This may happen but is increasingly unlikely. Why? Well it is likely that you, like most other business owners, play a role in the day-to-day running of the business.
However small that role is it would need to replicated in some way so as not to negatively affect the business.
The new business owner will want to ensure that these tasks and processes still continue to be carried out by a replacement of you going forward.
They may ask you to be involved for a period to ensure these activities are handed over successfully, and are then being run as they should be.
This is not an unreasonable request so be prepared for this to happen and sometimes the sale price may even be linked to the business’s performance during this period.
This is simply a way of any new owner managing the risk involved with purchasing the business and it not quite running the way it did when you were there!
Think of the positive side: your continued involvement with the new business owners to ensure that the business you have worked so hard to create is continuing to be successfull, and all your staff are happy and comfortable with this well managed transition period.
Selling a business may be a challenge. We hope however, with the right expectations, the right preparation and the right support you can achieve what you desire and there can be a great outcome for everyone involved.
Get in touch with us to help you prepare your business for sale or if you are considering selling, whatever stage of this process you are at. We can help you get to the ultimate outcome you may be hoping for when it comes to selling your business.
