Within the world of business, the unfortunate truth is that numerous areas of misinformation and outright myths exist. Whether due to previous trends that are no longer present, long-standing mantras that have never really been investigated or just outright falsehood, you have to be careful to do proper research in several areas rather than just believing word-of-mouth that could easily be false.
At Utah Business Consultants, we’ve seen several examples of misinformation throughout our years providing quality business broker services, from business valuation and exit planning shopping for a business when the time is right. Our brokers will always set you right in these cases – let’s go over several areas within mergers or acquisitions where misinformation has spread widely across the industry, plus debunk these myths for you right here and now.
Myth #1: LOI Ends Negotiations
LOI refers to “letter of intent” or “letter of intention,” terms that, as the names suggest, signal an individual or company’s intention to purchase the entity in question. In many business sales, the LOI being offered and signed is one of the key signs that the deal is proceeding and could be completed soon.
However, a major mistake made by many business owners and buyers alike is assuming the LOI means the negotiation has ended and the sale is final. This simply is not the case – only when a purchase agreement has been drafted and signed by both parties is the negotiation over. Between these two agreements are several areas of due diligence, and if the details don’t line up here, the deal could go south.
Myth #2: Offers Vs. Proper Capital
This is a myth related to trust: There’s an assumption among some business owners that any entity who makes an offer on a business has the proper funds to follow through. Unfortunately, many unsavory folks will make offers even if they don’t have enough money – doing your due diligence here is vital to ensure these distractions don’t cause you to miss a truly qualified buyer.
Myth #3: Debt Within Purchase
If you’re acquiring a business, there’s absolutely no requirement that you must take on the new company’s debt as part of the sale. This area may be written into the contract in some cases, but you also have many options where debt will be handled in other ways.
Myth #4: Selling Entire Business
Down similar lines, many in the business world think you can’t acquire a business unless you’re taking on the entire thing – this isn’t true either. There are plenty of situations where sellers sell off multiple pieces of the business to various minority or majority owners, with several possible benefits to this approach – both for buyers and sellers.
Myth #5: Selling On Your Own
Finally, while it’s technically possible to sell a business on your own, doing so without the assistance of professionals is highly inadvisable. Business brokers bring extreme value to these kinds of sales, increasing your potential ROI by around 20 percent on average. Not having one, on the other hand, leaves you at a huge disadvantage in terms of timing, sale quality and having enough time available to handle both the sale and your daily responsibilities.
For more on common myths about business sales, or to learn about any of our business brokerage services, speak to the staff at Utah Business Consultants today.