Thinking of Selling Your Business, Please do not
Thinking of selling your business?
Please do not try or do any of the following.
These suggestions come from actual phone calls and conversations I have had with business owners that are either thinking of selling their business or actually have it on the market and spoken to family, friends or a buyer called and said this is what they want them to do. Some of these examples even come from other brokers and these brokers generally specialize in another area of real estate such as selling a house or commercial real estate which has a totally different dynamic to selling a business.
Guess the value of your business
Business owners, by their nature, are optimists. When it comes to selling their business and deciding its value they use different formula. Some of the criteria they use includes “because it seems fair”, “it’s what I think it is worth” or the best one “if I don’t get this price then I don’t want to sell.”
If you own a business and plan to sell and your thinking falls into the category above then please don’t put your business on the market as you really don’t want to sell. A genuine and motivated buyer has options. They already have their guard up when making their inquiry as they don’t want to overpay, or worse still, buy the business and found they made a mistake. A buyer always has options which includes doing absolutely nothing.
Not being clear what is for sale
I’ve just gone through the frustrating exercise of working with a business owner, doing a valuation, putting the business on the market and then as I brought each qualified buyer to him, he decided to vary what he was selling for each buyer. The end result was that he lost 6 buyers as each buyer wasn’t comfortable with what was happening and so dropped out. By the time the seventh buyer came along the seller had learned from his mistakes and we were able to get the business sold but it meant the seller received thousands of dollars less than expected because different issues forced him to lower his price each time.
Allow the broker or buyer to interview the employees
I received a call this week from a business owner that had to move quickly to sell their business. One of the brokers they’d approached only agreed to help if they could come and interview the employees. You do not want this to happen.
Most employees are at will. Even if they are salaried, if they find out there will be a change of ownership on the business their first instincts will be to look for another job as their preference is move to the known as opposed to the unknown. If there is a job vacancy that’s similar to what they are doing and they know other employees or the owner it will make more sense to them to pursue that option as opposed to wait and see if the new owner wants to offer them a job or they like the new person they will be working for.
A business buyer wants the business they buy to be as stable as possible. If customers, employees or suppliers are unsettled it reduces the amount they are willing to pay.
Selling a business is a reactive and at times, very frustrating process. For the seller, there are many things they do not control or have little influence. When they own the business they have a lot of control and also a lot of ability to make the final decision. If you are thinking of selling your business make sure you are ready for the ups and downs as they are guaranteed to be part of your journey.
Selling a business also takes a lot of time and emotion. It’s much easier to let a third person handle the selling process as its very hard for a buyer to ask the hard questions they need to ask of the owner to get through the process of buying the business.
Are you thinking about selling your business and move to your next challenge? Would you like to know the value of your business? If you would like more information please visit my webpage Business valuation. If you would like more immediate help you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.