In this series of articles, we are going over the top mistakes business owners have to rectify before they consider selling their business.
Selling a business is a complex venture that requires aligning several different factors to achieve a successful outcome. Whether the sales transaction culminates in the optimum outcome for you depends on your preparation, effective marketing, timing of sale, as well as the strength of your business’ structure and operations. Selling a business takes time and effort to secure a deal that truly makes sense from all angles.
Deadly Mistake: Losing Focus On The Business
The thirteenth mistake many business owners make is to only focus on the sales event while allowing business operations to falter. This is an all too common mistake that can end up damaging profitability and ultimately, adversely affecting the sellability of a business.
It is important to understand that a business must ideally be sold when it is performing at its best. Being immersed in the intricacies of the sales process yet failing to pay the attention to the operations of your business can be a costly mistake. Your business’ performance may suffer and consequently, its value in the eyes of the potential buyers may plummet.
Many entrepreneurs seem to want to check out once they list their business for sale. However, selling a business successfully can take time, and time can threaten the value of a business when its leaders lose sight of the big picture. From the time a business is put on the market to the closing of the transaction, the sales cycle for most businesses is nine to twelve months. During this time, it is imperative that you remain focused on the performance of the business; many times business owners are too focused on the prize and fail to keep their house in order which can ultimately prevent you from realizing your ideal transaction.
The Issue Around Obsessing On The Sale
It is important that you have a decisive will to sell and a strategy to execute your plan. However, obsessing too much over the sales process can be dangerous, as it can consume most of your time and efforts, creating a diversion that can be fatal to your business. While it’s great to have the vision of a successful exit, it helps no one if the owner allows the business to lose its value. The value of your business is determined by its ability to generate consistent streams of revenue, among other things. A business that has an unfocused owner at its helm is likely to go wayward and lose its value.
It is important to recognize the value drivers of your business. It is highly likely that the stability of the operations and its profitability are the factors that have brought your business to a place where you can hope to sell it for substantial rewards. It is important to keep these value drivers intact once you start the search for potential buyers for your business. The history of your business may be important; however, it is the present performance, all the way up to closing, that matters the most. Buyers cannot always see the many years of hard work you have put in, but they do analyze the current facts and financials. If you turn your attention away from your business, the performance may likely decline, painting a negative picture of the viability of your business.
Developing a well-run, profitable business takes years of hard work and painstaking efforts. It is important that you do not let things slip away after putting your business on the market. If the owner disengages from preserving everything they’ve worked for up to that point, it could result in a decline in revenue and/or profitability. The timing of your sale is crucial to secure a valuable price. In addition to market indicators and overall economic climate, the life cycle of your business as well as revenue trends will affect the value of the business and your sales price. It is important to keep your business generating significant revenue and returning industry average or greater profits while you identify potential buyers.
Why Focusing On The Right Things Is So Important
If the strength and stability of your business has allowed you to access a couple of interested and financially capable buyers, it is important that you keep them interested and willing to pay the asking price you desire. If a potential buyer identifies a downward revenue trend as a result of poor operations management, they’ll be much less open to paying your asking price. Your years of effort may be in vain if you allow the operations of your business to falter in the final steps of the sales process.
Maintaining buyer-seller momentum is important to closing a lucrative transaction within a reasonable period of time. Unpleasant surprises can damage this momentum and create trepidations in the mind of the potential buyers. The perception of value of your business may also greatly suffer. Careful planning and preparation of the sales process can help you keep most surprises at bay. However, if you fail to maintain strong control over the operations of your business, you and the prospective buyers may be in for many unpleasant surprises that can affect your business’ ability to maintain a competitive edge and generate desired revenue.
The Consequence Of Losing Focus
The lack of focus on the business operations may result either in a buyer offering much less than originally expected, or buyers simply staying away based on the downward revenue projection. Continuing to run your business effectively is also important for another reason. You need to be ready for the possibility that you might not be able to sell your business within the desired time period. You may fail to appeal to the right buyers, the industry may falter or the overall economy of the country may decline. If you have neglected your business while trying to close the transaction and the deal fails to materialize, you will be left with a poorly managed business on a downward spiral.
It is important that a seller keeps their focus strongly on the business, even while going through the selling process. Navigating the course between running a consistently successful business and steering it towards a favorable sale is crucial for a business owner when looking to close a successful sales deal. Professional guidance can make this an easier proposition. A team of advisors comprised of experts in different fields can help point out important actions to take along the way towards a successful sales event.