Biggest Mistakes that a Seller Makes.
1. Wrong price
This is without a doubt the main reason businesses don't sell. If your price is too high, buyers don't take you seriously and won't bother to investigate further. If it is too low you will leave something on the table. Most sellers don't know the value of their business. Ask a broker, get a valuation. Ask an intermediary that is experienced in selling your type of business. Having a firm idea of what you would like to achieve is ideal but keep it within reason.
This is without a doubt the main reason businesses don't sell. If your price is too high, buyers don't take you seriously and won't bother to investigate further. If it is too low you will leave something on the table. Most sellers don't know the value of their business. Ask a broker, get a valuation. Ask an intermediary that is experienced in selling your type of business. Having a firm idea of what you would like to achieve is ideal but keep it within reason.
2. Inadequate financial records & information
Private businesses are set up to minimize tax, not show maximum profits. However, profit is one of the principal yardsticks of valuation. Low Profits = Low Valuation. If there is a good reason for low profitability and you can demonstrate solid results, make sure you document this. Nothing kills a deal quicker than failure to produce accurate, up-to-date, financial information or not answering queries quickly and efficiently.
Private businesses are set up to minimize tax, not show maximum profits. However, profit is one of the principal yardsticks of valuation. Low Profits = Low Valuation. If there is a good reason for low profitability and you can demonstrate solid results, make sure you document this. Nothing kills a deal quicker than failure to produce accurate, up-to-date, financial information or not answering queries quickly and efficiently.
3. Lack of a firm decision to sell
Why do you want to sell? This will be one of the first questions a buyer asks you. Give some serious thought to why you want to sell. Common reasons include retirement, health, capitalization or a career change. If the buyer isn’t comfortable with your reason they will simply walk away. If you have not made a firm decision to sell, whatever your motivation - don't. Wait until you’re sure it’s what you want to do and have a firm idea of what you want to achieve.
4. No preparation
Unbelievably, many businesses come to the market without a single idea of what is involved in the sales process and what they want to get out of the sale. It is vital that you understand these aspects and have a firm plan for what you would like to achieve. If you are poorly prepared, it will show, frustrate buyers and waste everybody’s time. The end result is NO SALE. Do not underestimate the amount of time and effort it will take to get a positive result.
Unbelievably, many businesses come to the market without a single idea of what is involved in the sales process and what they want to get out of the sale. It is vital that you understand these aspects and have a firm plan for what you would like to achieve. If you are poorly prepared, it will show, frustrate buyers and waste everybody’s time. The end result is NO SALE. Do not underestimate the amount of time and effort it will take to get a positive result.
5. The right buyer
Usually the best deals arise when a buyer has a real motivation to buy - such as: when they will be gaining skilled staff, a proprietary product, a new geographic location / sales territory or lucrative contracts. These strategic buyers are driven by more than just profitability, which usually means they can offer better value for the business.
Usually the best deals arise when a buyer has a real motivation to buy - such as: when they will be gaining skilled staff, a proprietary product, a new geographic location / sales territory or lucrative contracts. These strategic buyers are driven by more than just profitability, which usually means they can offer better value for the business.
6. Demanding an all cash deal
Some buyers are naturally suspicious of sellers who demand total cash settlement. What is being hidden? How much faith does the Vendor have in his business? Buyers may pay a substantial premium for an element of seller finance. Keep an open mind and you might get a better deal.
Some buyers are naturally suspicious of sellers who demand total cash settlement. What is being hidden? How much faith does the Vendor have in his business? Buyers may pay a substantial premium for an element of seller finance. Keep an open mind and you might get a better deal.
7. Trying to sell yourself
Selling a business is a complex and time-consuming process. It is very easy to underestimate the process and think you can do it all. You wouldn’t be the first or last to take your eye off the ball while trying to sell, letting your business suffer – weakening your sales proposition.
A buyer will automatically assume a position of advantage if they see you have chosen not to take professional help, especially if they equip themselves with an army of experts. Beware. Using a broker means that you will benefit from an experienced professional who understands what it takes to make a deal happen – controlling the process from start to completion. Not convinced? One of the best reasons to use a broker is to act as a buffer between you and the purchaser. There will be times when you’ll want to adopt a tough negotiating position - a broker makes this possible without antagonising the buyer. Remember, you might have to work with a new owner during a handover.
Selling a business is a complex and time-consuming process. It is very easy to underestimate the process and think you can do it all. You wouldn’t be the first or last to take your eye off the ball while trying to sell, letting your business suffer – weakening your sales proposition.
A buyer will automatically assume a position of advantage if they see you have chosen not to take professional help, especially if they equip themselves with an army of experts. Beware. Using a broker means that you will benefit from an experienced professional who understands what it takes to make a deal happen – controlling the process from start to completion. Not convinced? One of the best reasons to use a broker is to act as a buffer between you and the purchaser. There will be times when you’ll want to adopt a tough negotiating position - a broker makes this possible without antagonising the buyer. Remember, you might have to work with a new owner during a handover.
8. Timing
The best time to sell your business is when you don't have to. Sell when your sales and profits are at, or near, their best. It can be hard to justify a great price and do a deal when your sales volume and profitability are in decline. Plan your sale in advance make sure all the right elements are in place, especially tax advice. Being well prepared can really make the world of difference in terms of the money going into your pocket.
There is also a definite timescale to closing a deal. Buyers can quickly lose interest and move on if they feel they are not making progress or not getting accurate information efficiently. Using a good broker should address this problem.
The best time to sell your business is when you don't have to. Sell when your sales and profits are at, or near, their best. It can be hard to justify a great price and do a deal when your sales volume and profitability are in decline. Plan your sale in advance make sure all the right elements are in place, especially tax advice. Being well prepared can really make the world of difference in terms of the money going into your pocket.
There is also a definite timescale to closing a deal. Buyers can quickly lose interest and move on if they feel they are not making progress or not getting accurate information efficiently. Using a good broker should address this problem.
9. Lack of a business plan
Buyers buy based on their perception of the future revenue stream of the business. The buyer, as part of the evaluation process will prepare a business plan. The seller is much better positioned to project market potential and costs than the buyer. A business plan with well-reasoned and documented operational information will go a long way in convincing a buyer of the long-term future of the company.
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