In this series of articles, we are going over the top mistakes business owners make when they decide to sell their business.
Selling a business can be a minefield if you don’t know what you’re doing. One wrong move can negatively impact your chances for a fruitful exit. Taking the right steps to properly prepare your business for sale and making informed decisions based on evolving economic conditions and changing market dynamics is necessary to leverage an optimal sale.
If you are looking for a safe and lucrative exit strategy, you have to avoid the common mistakes business owners make when trying to achieve this very goal.
Deadly Mistake: Going Way Too Fast
The twelfth mistake we will discuss is placing your business on the market too quickly. We see many businesses failing to sell for the right price or not selling altogether due to this seemingly inconsequential mistake. Your business cycle, the outlook of your particular industry, market sentiment regarding purchase and acquisition of businesses, the availability of finance and capital in the market, and the overall state of the economy are some of the notable factors that must dictate the time you choose to put your business up for sale. Choose the wrong time, and you can jeopardize your retirement dreams!
Timing is a delicate aspect of selling a business successfully, and pulling the trigger too early in the process can be detrimental towards achieving the best value for the sale. It is not necessary to list your business on the market the moment the idea to sell it comes to your mind. In most instances, some tact and patience would not hurt.
You can only sell your business once; therefore waiting until the time is right is the best way to do it. Making your intent to sell your business public without testing the waters first can have counterproductive results. By making this mistake, you may compromise the confidentiality and scare away any potential buyers.
A strengthening economy does not necessarily mean that the market is ripe for every business in every industry. If your business has weathered the storm of an economic downturn and you are more than ready to cash in, pausing for a moment and carefully analyzing the market in your industry will do you a wealth of good. It is very possible that this is in fact the perfect time for you to start implementing your exit strategy; however, the opposite may be possible as well. Comprehensive analysis of all the market forces and factors that can affect the value and price of your business is mandatory.
Aren’t we all glad that the economic downturn is mostly behind us and many businesses are showing signs of improvement? This may mean better chances of selling your business and greater access to more prospective buyers. What could be a better time to sell your business?
Well, if you are not forced by any personal or financial compulsion, selling a business without contemplating the future possibility of increase in its valuation could be a mistake. Even if the market looks good now, it’s possible that your position could improve over the course of time.
How Strong Is Your Position?
The general outlook of your industry, the demand of the products and services you offer, as well as the expansion and growth opportunities offered by your business may determine the strength of your position. Your skill and knowledge may have helped your business stay afloat during the trying times; however, if your industry is finding it hard to recover, the chances of a buyer taking a chance on your company are slim. Similarly, if the demand for your products is projected to cool down in the near future, your chances may already be hurt. In this scenario, giving your business some time to make the necessary adjustments makes sense.
Most business experts advise starting a dedicated preparation a couple of years before you put your business up for sale. Proper planning can help you take measures to propel your business to its highest value and take advantage of the ripe economic conditions when they present themselves.
The business you have painstakingly developed should ensure a comfortable life after retirement. To get your business valued for the best possible price, financial and legal due diligence on your part can save you time-consuming hassle down the road and give you an opportunity to rectify any factors that may reduce the value of your business.
Is This The Right Time?
You may be confident that your business is performing well and the time to sell it is now. However, in some cases, you should wait until the company’s financials improve or until the market conditions are favorable and will help you secure the best deal. Receiving a fair value for your business is more important than reaching a deal in a hurry. Placing the financial matters of your business under control and ensuring strong structural measures are in place to assist the new owner are a few steps required to increase the offering price of your business. Rushing the process of selling your business does not give you enough time to improve these value-enhancing factors.
The Importance Of Professional Advice
However, waiting to actually place the business on the market does not necessarily mean that you need to wait to have a preliminary conversation with a team of advisors that are qualified in the matter. In fact, hiring professional advisors is the first thing you should do when thinking about selling your business. Professionals, who typically have a keen eye on the ups and downs of the market as well as your industry, can better guide you about the right time to sell your business. They can give you valuable insight into the factors that can affect the attractiveness and value of your business in the eyes of buyers.
You can start taking the necessary steps to bring your business in the right shape for the sales process, thereby ensuring your business is ready to be marketed, given the right conditions. Careful preparation and proper timing are the factors that matter the most when selling your business. Determining the best possible time to sell your business can be complicated. However, by consulting your advisory team, you can uncover insights that impact the timing of your sale, empowering you with knowledge to sell your business for the highest possible price.