As is often said, timing is everything in life and in business. The time will come when it makes sense to sell your company. Perform your due diligence, time the market just right and you will maximize the sale price of your business. Below, we delve into the three most important mistakes to avoid when selling a business. Sidestep these pitfalls and you will get the most possible money for the business you have worked so hard to build.
1. Failing to Properly Position the Business for Sale
Try to shift your perspective to that of potential buyers. Consider what these buyers are looking for in a business, how they would like to be spoken to, the manner in which the business should be portrayed and other subtleties. Put yourself in the shoes of a buyer as you prepare your sales pitch. Position your business in the best possible light and you will have done your part to maximize the company’s value.
When in doubt, focus on the small stuff. Prospective buyers are in search of companies with autonomous personnel who are not over dependent on ownership. Buyers also seek companies with ample opportunities for growth, a diverse customer base and a positive reputation within the community. Do not hesitate to document the improvements you have made to the business as well as pending improvements to show operations will only get better.
2. Not Knowing the True Value of Your Business
The typical business owner has a number in mind that will justify selling the business. This figure is typically higher than the company’s worth yet there is the potential for it to be lower, depending on market factors, debt, other financial ties and so on. It is important for business owners to understand the value of their business. Each unique prospective buyer will assign their own distinct value for the business.
The value each bidder assigns to your business is determined by what they feel it is worth to them at a particular moment in time. Consider market conditions, comparable sales in your region of similar businesses and the timing of the sale before setting expectations for a certain number. If your expected selling price is unreasonable, you run the risk of holding on too long, mistiming the sale and receiving significantly less than you should.
3. Waiting too Long to Sell
Though you cannot time everything to perfection, you can control the point in time at which you put your business up for sale. If you wait too long, offers will eventually dry up. Market conditions have the potential to change. Your business might not appreciate in value as you wait for a better offer. Even alterations to the industry your business operates in can affect your company. Negative local economic news can also reduce the value of your business. In fact, your business itself might decline in value as you wait for that eye-popping offer. Don’t be afraid to take an offer if it meets or surpasses your asking price.