Selling a Business:  A Few of the Myths & Misconceptions

The typical “maintstreet” business owner will only sell a business once.  Understanding the complex process involved will help produce the best results.  Don’t allow common myths and misconceptions block the way to successfully marketing and selling a business – you have too much at stake!

Myth #1 – I Can Sell It Myself
Many owners believe they’re qualified to sell their business on their own.  Many owners are entrepreneurs and the key salesperson for the company.  But selling a business is not like selling a product or service.

When an owner also tries to sell the business, confidentiality is lost.  If word of a potential sale gets out, there are definite risks of losing clients, employees and favorable credit terms.  Competitors may pounce.

Most owners do not have the time to run the business as well as compile marketing materials, advertise, screen buyers, give tours and facilitate due diligence.  Best results are obtained when the owner continues to put all energy into running the business, boosting sales and maintaining performance.   Continuing strong performance in a business is a crucially important factor for realizing the best possible price on the market!

Myth #2 – I’ll Sell When I’m Ready
Certainly, an owner wants to be sure he or she is mentally and emotionally prepared to sell. But personal readiness is just one factor.  Tax planning and general wealth and succession planning are key components of being ready to sell.  Be sure to get help in covering all the bases before you take a business to market. 

Market factors can also affect selling price and time on market: talk with a professional and aim to sell when your personal goals are aligned with market conditions.

Myth #3 – I Know What it is Worth
Some owners will base the company value on what they need for retirement.  Others will tell you they should get $100,000/year for “sweat equity.”  Still others utilize “multiples” found in publications or supplied by accountants, lawyers or other advisors.  The buying side of the market is not likely to be persuaded by any of these “rough and ready” assessments.

A proper valuation by a third party is a good idea for anyone seriously considering the sale of their business.  An outside valuation will include a thorough analysis of the business and the market it operates in. This will provide a solid understanding of the company’s position in the eyes of potential buyers.  And should result in an asking price that can be supported with buyers in the market.

Myth #4 – It’s Like Selling a House
Preparing to sell your house may take a few weeks, then you want to get the word out to everyone that the house is on the market.  Once you get a satisfactory offer, you sign on the dotted line, turn over the keys and move on. 

Selling a business is a vastly different process.  A successful business sale requires lots of pre-planning, often months or even a year or more.  Why?  To do the carefully planned work of getting the business ready for the market:  sustaining sales, developing key staff, documenting processes and operations, stabilizing expenses and generally working to anticipate all the transitional needs of the business.

The average house will sell in less than four months, while the average business will be on the market for 6 to 9 months before a properly qualified buyer is located.  More time is needed for due diligence and closing. 

Even after the business is sold, the seller can be expected to put in at least a few months, and possibly years of transition time, helping to make the new owner a success.

The Fact Is:  A Professional Business Broker is the best choice for Selling a Business

Sound sale strategies will bring you the optimum price the market will bear. Go to market with realistic expectations by getting a professional valuation and using a professional business broker or intermediary to manage the process from beginning to end.

 

www.sunbeltvictoria.com

The Successful Sale

Confidentiality

The Selling Process

More Seller Resources