Avoid These Fatal Seller Mistakes
Don’t Make These Fatal Mistakes When Selling Your Business
Although every business has its own special qualities and issues, whether it is manufacturing, offers services, wharehouse or retail outlet, each has the same potential problems that must be carefully evaluated when selling it.
As successful business brokers in Palm Beach County Florida, Florida Business Brokers strongly believes that having knowledge and expertise in business sales is a worthwhile investment.
Many business owners build successful businesses from the ground up, through vision, dedication and relentless hard work. But most do not build a business with selling in mind and therefore, lack the understanding of the factors involved with structuring the selling process. The results can be truly devastating for the business seller if these vital factors are not handled correctly.
This article is an overview of the most crucial areas that will directly effect a successful sale of your business. Leaving out just one or interpreting it incorrectly, could greatly reduce the value of your business and the possibility of a successful future sale.
The following guidelines should be followed with the utmost care in order to ensure a smooth and quick sale of your business at the best price possible.
1) Structuring the Deal
Without knowledge of available options for deal structuring, the business seller is at a huge and costly disadvantage. Options such as leases, earn-outs, leverage buy-outs, royalties, non-compete contracts and consulting agreements add a great deal of value and security to the deal for both potential buyer and business seller.
2) Adjusting the Net Owner Benefit
If a business owner is to determine the correct value of the business, the balance sheet and income statements must be fine-tuned. Details like the owner’s salary, equipment depreciation, loan interest and fringe benefits can be included or omitted, depending on the circumstances. The resulting figures becomes the adjusted income statement, which will reflect the true benefit to the owner. This helps to determine the market value of the business.
3) Maintaining Confidentiality
Many business owners don’t realize that confidentiality is a vital factor in selling their business. When employees are made aware of the sale in advance, they may abruptly leave the company in search of other opportunities. Vendors may discontinue current, favorable terms. Both of these happenings will negatively effect market value as well as the business’s reputation.
4) Pre-Qualifing Buyers
Knowing how to pre-qualify a buyer is crutial. Florida Business Brokers take the neccessary steps to pre-qualify every potential buyer to avoid a doomed negotiation. Pre-qualifing saves you from having to spend hundreds of hours on misdirected efforts.
5) Continuing to Run Your Business
When a business is for sale, it is vital that your keep operating at peak capacity. Afterall, you are selling productivity and performance of business. If you spend time away from your business to conduct the selling procedure, it will have a direct impact on the market value of your business.
6) Adjusting for Owner’s Skills
Generally, a business is easier to sell when the owner’s skill set is easily replaced, ultimately increasing the value of the business.
7) Adjusting for Economic Conditions
Businesses that have high market value are typically those in industries that are going through a growth stage. For growth industries, there are specific valuation methods that are directly effected by economic conditions.
8) Providing Credible Information
All potential buyers of your business are entitled to information regarding your customer base, your competition and the business’s financial history. Along with these, potential buyers will want to know details about the industry, such as current size, growth potential and possible areas of expansion. This information must be provided in a salable manor that also ensures confidentiality.
9) Negotiating Techniques
As with most types of business deals, lack of proper negotiating techniques results in a greatly reduced selling price, unfavorable terms and loss of potential opportunities. More often than not, poor negotiation leads to no deal at all and no sale.
10) Placing the Proper Value on Your Business
For a buyer, a business only has value when they can anticipated earnings, see that its resources have been established and has a proven successful track record. Proper evaluation is crucial to the successful sale of your business.
11) Considering Seller Financing
All business buyers have financing options. To make your business more attractive to buyers, you must show a viable ROI. Seller financing shows buyers that you believe the business will pay for itself and provide the new owner a livable income.
12) Preparing for Proper Due Diligence
A successful closing of a business sale depends greatly on due diligence. In addition to being organized and fully prepared, you must be able to defend and prove statements made throughout the selling and negotiation processes.