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Evade the Fables in Selling a Business

Evade the Fables in Selling a Business

Your average entrepreneur will only need to sell his or her firm once in a lifetime. With only one shot and zero practices, it’s hard to do it perfect the first time. Knowing the fables from the facts is important in the educated sale of any business.

Fable #1 – I Don’t Need Any Help

Entrepreneurs often think that they’re the best option to market their business. After all, they created it right? Often an entrepreneur is the most successful salesperson in the company! But what an entrepreneur has to realize is that selling the company itself is a whole different ball game.

If you sell by owner, you can kiss discretion goodbye. Without that confidentiality, you’re going to have to do a lot of fast talking and soothing with all of your customers, employees, and the vendors.

If you are the selling agent, you also are going to be forced to invest the time necessary to market and sell. This will take your energies away from the company itself and most often the negative effects of your broadened concentrations are felt company wide. You can’t do everything. During a sale, your revenue and management must be at their peak to attract the best buyers.

Fable #2 – You’ll Buy When I’m Ready

Surely you want to be ready to sell with all of the I’s and T’s dotted and crossed and your emotional state prepared for the transition, but you have to remember there are many factors that have to line up. The state of the economy greatly affects investment interest. Interest rates, current unemployment, and many other present day issues can seriously affect the sale price. Your job is to be ready to sell at a moment’s notice so that you have the capacity to sell to the best buyers.

Fable #3 – I Know My Price

The problem with knowing your price is that you base it off of different factors than a buyer. For you it could be that your company is worth whatever you need to retire. Perhaps you undervalued your business because your goals are below the worth of your company! Buyers will value your business for its potential profits. Of course, they will want to claim that profits are lower than they really are in order to pay a cheaper rate. A third party valuation is very important in offering an objective point of view and helping the business transaction to be a win-win. A proper analysis will offer a clear cut vision of growth potential and past company achievements, rather than a vague guess at business worth.

Fable #4 – If I Can Sell My House, I Can Sell My Business

True, selling a house is an arduous process. It may take a few weeks worth of preparation. After the preparation, you have to broadcast the sale of your home to everyone else that’s looking for one. Once you find that someone who has decided to purchase, you agree on a price, sign the papers and leave the keys in their hands.

The sale of a business is a different animal altogether. It requires lot more pre-meditated planning to be successful. It can take between 1-3 years because making your business attractive is much more than just sweeping the floors and shampooing the carpet. You need to increase revenue, show growth and find key employees that can carry the work on when you’re gone.

The sale of a commercial building will happen within a third of a year. The typical sale of a business could take a full year. Bigger businesses typically take the most time.

But when you’ve sold the business you don’t just leave the keys. Many transactions will require that you allow the buyers a few months or maybe even a few years of transition time while they familiarize with their new asset. The new owner must be a success, and may require your help to mimic the growth you’ve created until now.

A solid plan will rake in the cash prize in the sale of a business. If you go with real goals and a team of professionals, the sale will be an exciting, thrilling conclusion to the risk and uncertainty you sustained over many years.

Wayne A. Simpson CPA, CBI is a Managing Partner at Utah Business Consultants and a Certified Business Intermediary with the International Business Brokers Association. Utah Business Consultants is a full-service Business Brokerage and Valuation firm.