I’m convinced most business owners think business sales just kind of happen. You run into a guy on a plane, or the phone rings one day and a sweet deal takes place. This misconception takes root from the sound bites heard from an acquaintance, or in the news. You don’t see or hear about the work that was involved.
Moreover, in my many years working on business purchase and sale transactions, I’ve come to believe that common sense does not lead sellers down the right path. Do-it-yourselfers make all kinds of mistakes. Here’s my stab at warning you away from the common ones.
Confidentiality Is the Plan, Rather Than a Part of the Plan.
When “quiet and confidential” is the number one goal, business sellers will tend to talk to buyer candidates as they run into them, one at a time, over years. And, over time, the grapevine does its dirty work, and soon you’re the only one who thinks it’s on the down low. You lose credibility and cachet. A better approach is to wait until you are really ready and then talk to all the good buyers at once.
Talking to Buyers Before You’re Sure You Want to Sell.
This is a total waste of time. If you’ve done it you wouldn’t be the first, but you gain nothing! You lose time that could have been better spent elsewhere. You lose credibility, and when the day comes that you are really ready, you’ve already cried wolf.
Waiting Too long.
Sell when your financials look great. Like everything, your business cycles. Don’t get greedy. It’s best when the trend has been up for a few years, but stability is key.
The market is the final decider of value. Listen to the market and prospective buyer and glean what changes will be best to make the sale happen. If several buyers pull away for the same reason, maybe you should pull back and fix the problem.
Failing to Prepare.
Selling a business is a paper chase. It’s also a sales activity. Get all your documents and sales materials ready before you talk to buyers. Prepare a presentation package with detailed, factual, and precise information.
Alternatives to Selling Are Not Explored.
Selling is a real pain in the tail, and quite drastic. All alternatives should be explored before you head down the sale road.
A Single Buyer Courted or Relied Upon.
Buyers are a dime a dozen. Many will waste your time. Courting one at a time serves only the buyer and frequently results in wasted time and money.
Negotiating with Buyers That Don’t Have the Dough.
You are prepared to share all about your business. Confidential information. The least they can do, to gain access to this data, is to convince you they have the dough. If they say someone else has the dough, insist you talk to that person directly. If you remain unconvinced, move on.
Not Knowing a Good Deal When You See It.
If you don’t know what a good price is, how can you make a decision? This includes terms that are fair. Small details can have large impacts.
At risk of repeating, selling a business is a sales endeavor. Be ready to spend time preparing documents, identifying buyers, screening candidates, negotiation, and the needs and requests of the prospective buyers as they endeavor to understand and purchase your business.
Yes, you need confidentiality, but the way to achieve it is by speaking with qualified buyers.
Sure, luck will play a role in success, but most business owners know vision, initiative, and hard work are how the money is made. This applies to business sales as well.