From a lack of preparation to proceeding without the help of a skilled intermediary, these are some of the most common mistakes made by sellers.
Selling a business for a satisfactory return and within your preferred timescale can be a challenging prospect. Attracting buyers requires a focused approach, careful groundwork, and realistic expectations.
Here are some common pitfalls you should avoid to boost your chances of a successful outcome:
Lack Of Preparation
Owners frequently underestimate the time required to prepare for a business sale. Most business brokers advise allowing significant time to thoroughly prepare for going to market.
This allows you to formulate a viable exit strategy, including an effort to make the business more appealing. For example, cutting wasteful costs, putting your financial history in order, and tidying or renovating your premises will positively influence the selling price.
Overconfidence
As elsewhere in your business activities, confidence can be a useful tool – provided it is grounded in reality. Purchasers will generally only pay what your business is worth – and their assessment of that figure will be based on independent valuations based on profit, asset values, and other measurable factors, not on your own personal estimate.
Obtaining a professional business valuation early will keep your expectations realistic and give you an idea of the work required to realize enough cash to fund your next venture or a comfortable retirement. It’s also helpful to research the online marketplace to check the asking price of similar businesses and to ask your VR Advisor about the current sales climate, prevailing trends, and the factors driving prices.
Overvaluation
Any business valuation must be a logical and transparent assessment of the enterprise’s worth. Prospective buyers will inevitably query the figures to understand the applied rationale, so any significant overvaluation will soon become apparent.
They will want to examine supporting evidence to verify profitability and the value of long-term depreciable assets. To convincingly refute accusations of overvaluation, you should adopt one of the standard business valuation formulas based on assets and income or even a multi-method approach – whichever suits your type of business best.
Misrepresentation
To get a good price, you will naturally seek to emphasize your business’s positive attributes. Nevertheless, avoid dubious practices such as producing inflated figures, misleading estimates, or concealing flaws. Apart from the ethical considerations, the discovery of such deception will likely prompt the withdrawal of prospective purchasers or, if discovered post-sale, legal action.
Therefore, the safest approach is to discuss all forecasts, projections, and other sensitive information with your professional adviser before disclosing it to a potential buyer.
Disclosing Sensitive Information Without a Non-Disclosure Agreement
A breach of confidence during the sales process can hugely damage your business. If details of the sale are leaked, it can unsettle key staff and prompt customers and suppliers to defect. If you disclose sensitive information to buyers without asking them to sign a non-disclosure agreement, you also risk that information becoming known to your competitors.
As with many other aspects of a business sale, a skilled business broker can advise you on screening buyers and deciding when to introduce non-disclosure agreements, what information to disclose, and how.
Deal Fatigue
Because of the procedures, regulations, and time involved, selling your business will always be a marathon rather than a sprint. And to continue the analogy, marathon runners are also more likely to quit the course.
That means patience, stamina, determination, and a clear understanding of your goals are essential to your cause. Administrative frustrations and sticking points are almost inevitable, and distinguishing between temporary setbacks and non-negotiable, deal-breaking issues may ultimately determine the quality of the outcome you achieve.
Refusing To Seek the Help of a Professional
Selling a business is not the same as running a business, so you’re probably an amateur in the game. Even so, too many business owners avoid hiring professionals, believing that the cost savings they have achieved will generate a higher return.
Though using a business intermediary incurs fees and commissions, having experts to handle financial and legal issues and negotiations will invariably result in a smoother, more discreet selling process, steering you clear of the most common pitfalls and maximizing your eventual returns.
How Much Do Brokers Charge to Sell a Business?
The cost of hiring a business broker can vary widely depending on several factors, including your location, the type of business being sold, and the level of involvement you require from the broker during the sale or M&A process. Some brokers may charge a flat fee or retainer, while others operate on a commission-based structure, often calculated as a percentage of the final sale price.
Looking for a Business Broker in PA? Pair Up with VR Bucks County.
If you’re considering selling your business, don’t leave your success to chance. Avoid common pitfalls and maximize your return by partnering with a trusted expert in mergers and acquisitions. At VR Bucks County, we specialize in valuing and selling businesses for sale in Bucks County, PA, and throughout the state and region. Whether you’re exploring businesses for sale in PA or preparing to sell your own, our experienced advisors are here to guide you through every step.
Contact us today for a professional business valuation and expert guidance to help you achieve a successful sale.