Plan Ahead and Avoid These Four Common Mistakes of Selling Business

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http://www.2misi.com/article/2012/06/plan-ahead-and-avoid-these-four-common-mistakes-of-selling-business

If you are looking to sell your business, chances are you are not alone. Now a latent supply of owners who were waiting for their business to become profitable again are beginning to emerge and are looking to sell. This influx of sellers can result in a crowded marketplace, which means sellers have to be on top of their game to get the best price for their business.

As a rule of thumb, the best businesses command the best valuations, no matter how crowded the marketplace. But with competitive pressure from other sellers, there is little room for mistakes. This guide will help you avoid common mistakes that can derail a business sale.

Mistake 1: Not Properly Preparing Your Business for Sale

 

Before buyers sign on the dotted line, they will research your business as they would any other big purchase. Sellers need to be prepared to demonstrate that the worth of their business matches the selling price. This means keeping your financial records in order. Good record keeping is a simple way to establish buyer trust.

Be sure to resolve any outstanding issues that could derail a sale, like legal issues or unfilled key management positions. If your business is struggling, focus your efforts on restoring it to profitability and constructing a plan for continued success. A detailed strategy can give you a much higher chance of attracting the right buyer and making a sale happen.

Just as important as the paperwork, don't forget the physical elements of your business as well. Consider upgrading technology, establishing and documenting key processes and even sprucing up your interior - the physical appearance of your business is often the first impression the buyer gets, so make sure it's a positive one.

Mistake 2: Not Understanding the Market

Selling at the right time and for the right price is much easier said than done. It is important to work with your business supervisor to grasp the current state of the market and what that means for the sale of your business. It is important to price it appropriately. The goal is to set a price that will attract a number of serious buyers and yet allow you to close the deal at the highest possible sales price.

To properly price your business, you will need to know where it stands in the market as compared to others. So, work with your business supervisor and conduct some research to determine where your business stands in the current marketplace, and then price accordingly. Business owners who plan ahead and take the time to research the market will stand out from competition, thus resulting in more offers and a heftier sale price in the end.

Mistake 3: Not Getting the Word Out

With more businesses coming on the market this year, it's important to get the word out and market the sale broadly to attract the greatest number of potential buyers. Listing online can help in this endeavor, allowing more potential buyers to see your listing and generating greater demand from potential buyers. The more buyers that know about your business, the more offers you are likely to get.

Higher demand for your business translates to a higher sales price, so the goal is to create a multiple buyer situation. Don't limit your focus to just one or two potential buyers or the first buyer to make an offer. Instead talk to multiple qualified prospects at the same time to continue generating a sense of urgency and demand for your business. Also, speaking with multiple buyers can help generate a backup plan in the event that the primary buyer is forced to withdraw from the sale.

Mistake 4: Not Offering Seller Financing

To close a sale in this economy, business buyers and/or their lenders are almost certainly going to require some form of financing to purchase a business. While lending from local and national banks continues to loosen, the progress is still slow, and most banks require seller financing as part of any deal they fund. This means you will be required to take a minimum of 30 percent of the sale price in the form of a note that the buyer will pay back over time, with interest. Essentially, you still have an investment in the business even after the sale, meaning you are expected to participate in a successful transition to the new owner.

This confidence and willingness to invest in your business even after a sale will encourage potential buyers, and their lenders. Furthermore, it will help you close your sale and ensure the new owner's success, maximizing the chance they will be able to complete their long term payments.