In part one of this multi-part blog series, we went over some of the most common errors made by sellers during a business sale situation. While taking the right actions during your sale is important, just as vital will often be knowing the pitfalls to avoid as you look to complete a profitable sale.
At Utah Business Consultants, we’re happy to assist Salt Lake City and other Utah clients with numerous areas of selling their business, from business exit planning services through numerous other parts of the sale process — and we have extensive experience in the business sale realm that allows us to steer all our clients well clear of any major errors as they move through this process. Here are a few more of the most common such mistakes we see, plus how to make sure you avoid them and focus on the important elements of your sale.
Lack of Buyer Research
Knowing your buyer is of vital importance when selling a business – yet this is a step that’s all too often skipped or glossed over during business sale planning. It’s not enough to simply know your industry and some of the bigger players in it; you’ll need as much specific information as you can get on those prospects who are showing serious interest in your company, including their ability to finance what you’re looking for in terms of purchase price.
Asking the right questions when vetting potential buyers is just as important, and far too many sellers skip this step in order to get to the point where they’re already negotiating with someone. Before you ever get to this point, you’ll need to know about things like their most recent business sale, what kind of financial track record they’ve had, whether or not they’re industry insiders and their reputation in general.
Misunderstanding Deal Structure; Leaping at Raw Numbers
As a seller, you must avoid the temptation to simply see a big number presented to you in an offer and immediately accept it, no matter how good it looks. The fact is that big numbers can indicate several things – most often, buyer desperation to get into your business, but also perhaps an unrealistic appraisal of the company’s worth or its current financial situation.
The worst thing you can do in this case is accept a deal based on these raw numbers alone; rather, you need to investigate the specific structure of any offer that’s been given. For instance, if a buyer is offering you $500,000 in cash for your company, does this include all of the financing required to get the deal done? Or will you need to still secure some outside funding? If so, what are the interest rates being offered? These and many similar areas are those we’re happy to assist you with in our role as business brokers.
Refusing Outside Advisors
While no one would ever deny that you know more about your business than anyone else, this doesn’t necessarily qualify you to sell it without any help from professional business brokers, advisors or other knowledgeable parties. Getting stubborn and assuming you’re the best one to handle your business sale might lead you to overlook problems that could otherwise be avoided.
A good example of this is when a seller tries to sell his or her company without involving an attorney — while this is indeed something that can often be done, it’s also dangerous due to the number of legal issues which must be handled in the process. By acting on your own behalf, you could overlook or mishandle some vital part of the sale that only an attorney is qualified to handle — and this too often results in buying yourself extra time on a move that’s already gone bad.
For the very best in business sale assistance from longtime pros throughout the great state of utah, contact us today at Utah Business Consultants.