Straightening Out Common Misconceptions on Business Sales

While there are several distinct benefits to consulting with a quality business broker before buying or selling a business, one of the top such themes is the ability to correct misinformation. Business valuation and selling, like many other areas, is rife with myths and misconceptions that have arisen over time for a variety of reasons, but a top business broker can ensure you don’t fall victim to any of these myths during important negotiations.

At Utah Business Consultants, we’re here to help with everything from business valuation to exit planning and much more. Let’s go over a few of the top misconceptions that have made their way into the mergers and acquisitions world, setting the record straight in some important areas.

Misconception #1: LOI Signals Negotiations Are Over

LOI stands for “letter of intent,” and it’s a very important piece of any sale. However, some buyers or sellers have a tendency to look upon this document as a final sale – this is false and potentially dangerous.

Until there’s a specific purchasing agreement in place, an entirely separate document, no business sale has been truly completed. There’s a big gap between these two things, one that involves several areas of due diligence to ensure that intent to purchase is realized in reality. Lots can change during this due diligence process, so understand that your negotiations remain ongoing even if a LOI has been signed.

Misconception #2: Having the Money

Another possibly dangerous myth is the idea that any individual or entity who makes an offer on a business always has the money to back it up. This is often not the case, and some will offer at a business without actually securing the money first. This can waste everyone’s time, and you should do proper diligence on potential buyers if you’re selling rather than just assuming they’re good for their offer amount.

Misconception #3: Going Solo

Some sellers assume they can just handle things themselves when they’re looking to move on from the business, and while this might technically be possible, here’s a bet that you won’t get the desired results. Strong business brokers provide incredible value, from handling the detailed paperwork and other time-consuming elements of a given sale to helping you avoid common pitfalls in negotiations.

Misconception #4: Selling the Entire Business

Finally, while most business sales involve transferring 100 percent of the business to the buyer, this does not always have to be the case. There are many situations where selling or retaining a minority stake in a company might be valuable, and there’s no legal requirement that you sell the entire business all at once.

For more on the common myths surrounding business sales and purchases, or to learn about any of our business valuation or other brokerage services, speak to the staff at Utah Business Consultants today.

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